- Japanese Yen is bid despite dovish BOJ hopes, risk-on in equities.
- AUD/JPY likely taking cues from yield differential.
- The pair is stuck in a sideways channel.
The bid tone around the anti-risk Japanese Yen (JPY) strengthened, pushing the AUD/JPY lower to 75.51, despite growing pressure on the Bank of Japan (BOJ) to ease more.
Japan’s core inflation slowed to its weakest in about two years in June, fueling stimulus calls. Further, reports are doing the rounds that the BOJ will likely trim its inflation forecast for the current fiscal and may also cut economic growth forecasts.
Also, Asian equity markets are flashing green at press time with the Shanghai Composite up 0.87%. The US stocks also posted gains in the overnight trade.
What’s more, the Nikkei manufacturing PMI released at 00:30 GMT today showed Japan’s manufacturing activity contracted in July.
Even so, the JPY is pushing higher, possibly due to weakness in the yield differential. The spread between the 10-year Australian and Japanese government bond yield is currently seen at 145.6 basis points, down two basis points on the day and off more than 10 basis points from the high of 158.7 basis points seen on July 15.
As far as technicals are concerned, the outlook remains neutral with the pair still trading in a sideways channel on the daily chart. At press time, the pair is trading at 75.52. The lower edge of the channel is seen at 75.26 and the upper end is located at 76.05.
Pivot points
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