AUD/JPY rallies to weekly top, bulls await sustained strength above 97.00 mark

AUD/JPY catches aggressive bids in reaction to dovish remarks by BoJ’s Uchida.
A positive risk tone further undermines the safe-haven JPY and lends support.
The RBA’s hawkish stance and the upbeat Chinese import data act as a tailwind.

Haresh Menghani FXStreet

The AUD/JPY cross builds on this week's goodish recovery move from the vicinity of the 90.00 psychological mark, or its lowest level since May 2023 and gains positive traction for the second straight day on Wednesday. The strong intraday momentum lifts spot prices to a fresh weekly peak, around the 97.00 round figure during the Asian session and is sponsored by a combination of factors.

The Japanese Yen (JPY) comes under intense selling pressure in reaction to dovish remarks from Bank of Japan (BoJ) Deputy Governor Shinichi Uchida, saying that the central bank won't hike rates when markets are unstable. This comes on top of signs of stability in the global financial markets, which is seen as another factor undermining demand for the safe-haven JPY and lending some support to the AUD/JPY cross.

The Australian Dollar (AUD), on the other hand, continues to draw support from the Reserve Bank of Australia's (RBA) hawkish outlook on Tuesday, indicating that it will keep policy restrictive in the wake of still sticky inflation. Meanwhile, Chinese trade data released this Wednesday showed an unexpected surge in imports, by the 7.2% YoY rate in July, which suggested that domestic demand remains resilient.

Investors, however, remain worried about signs of cooling economic growth in China – the world's second-largest economy. Apart from this, geopolitical risks stemming from the ongoing conflicts in the Middle East should keep a lid on the market optimism. This, in turn, could offer some support to the JPY and cap gains for the AUD/JPY cross, warranting some caution before positioning for any further appreciating move.

Economic Indicator

Trade Balance CNY

The Trade Balance released by the General Administration of Customs of the People’s Republic of China is a balance between exports and imports of total goods and services. A positive value shows trade surplus, while a negative value shows trade deficit. It is an event that generates some volatility for the CNY. As the Chinese economy has influence on the global economy, this economic indicator would have an impact on the Forex market. In general, a high reading is seen as positive (or bullish) CNY, while a low reading is seen as negative (or bearish) for the CNY.

EUR/USD deflates to fresh lows, targets 1.1600

The selling pressure on EUR/USD now gathers extra pace, prompting the pair to hit fresh multi-week lows in the 1.1625-1.1620 band on Friday. The continuation of the downward bias comes in response to further gains in the US Dollar as market participants continue to assess the mixed release of US Nonfarm Payrolls in December.

GBP/USD breaks below 1.3400, challenges the 200-day SMA

GBP/USD remains under heavy fire and retreats for the fourth consecutive day on Friday. Indeed, Cable suffers the strong performance of the Greenback, intensified post-mixed NFP, and trades at shouting distance from its critical 200-day SMA near 1.3380.

Gold flirts with yearly tops around $4,500

Gold keeps its positive bias on Friday, adding to Thursday’s advance and challenging yearly highs in the $4,500 region per troy ounce. The risk-off sentiment favours the yellow metal despite the firmer tone in the Greenback and rising US Treasury yields.