AUD/JPY finds a short-lived pullback around 94.20 ahead of PBOC and PMIs

The AUD/JPY pair has sensed short-lived exhaustion in the uptrend around 94.20 in the early Tokyo session. The risk barometer has displayed a bullish open-drive movement as the asset is scaling sharply higher right from the first tick in today’s session. The short-lived hurdle is expected to fade sooner as investors expect a dovish stance from the People’s Bank of China (PBOC).

It is worth noting that Australia is a leading trading partner to China. Therefore, a loose monetary policy by the PBOC will also strengthen the antipodean. More liquidity flush in the Chinese economy will increase Australian exports and strengthen the Fiscal balance sheet.

The Aussie bulls defended them last week despite a severe decline in the Australian Employment Change. Instead of expectations of job additions by 25k, the Australian Bureau of Statistics reported a lay-off of 40.9k. However, the Unemployment Rate was trimmed to 3.4% from the expectations and the prior release of 3.5%.

Meanwhile, the yen bulls failed to display a buying action despite an improvement in the National Consumer Price Index (CPI). The economic data landed at 2.6%, outperforming the consensus of 2.2% and the prior release of 2.4%. The sustainability of the inflation rate above 2% may force the Bank of Japan (BOJ) to turn neutral.

Going forward, the S&P Purchase Managers Index (PMI) data by the IHS Markit will be of utmost importance. The Aussie Manufacturing and Services PMI are expected to improve to 57.3 and 54 respectively. While Japanese Manufacturing and Services PMI may accelerate to 51.8 and 50.7 respectively.