AUD/JPY rebounds after the post-BoJ slump to the lowest level since April 19

• A combination of factors drags AUD/JPY to a multi-month low on Wednesday.
• The mixed Australian macro data and dismal Chinese PMIs weigh on the Aussie.
• The JPY gets a strong boost after the BoJ’s 15 bps rate hike and hawkish outlook.

The AUD/JPY cross plummets to its lowest level since April 19 after the Bank of Japan (BoJ) announced its policy decision on Wednesday, validating the Asian session breakdown through the 200-day Simple Moving Average (SMA). Spot prices, however, managed to rebound over 100 pips in the last hour, albeit lack follow-through and remain below the 100.00 psychological mark. 

The Japanese Yen (JPY) strengthens across the board following the BoJ's surprise 15 basis points (bps) rate hike at the end of a two-day policy meeting on Wednesday. The Australian Dollar (AUD), on the other hand, is undermined by the mixed domestic data and contributed to the AUD/JPY pair's sharp intraday downfall. In fact, the Australian Bureau of Statistics (ABS) reported that the headline Consumer Price Index (CPI) rose 1.0% in the second quarter of 2024 and the yearly rate accelerated to 3.8%, both matching consensus estimates. 

That said, the Reserve Bank of Australia's (RBA) Trimmed Mean CPI came in at 0.8% and 3.9% on a quarterly and annual basis, respectively, missing market expectations. Nevertheless, the readings forced investors to scale back bets for further interest rate hikes by the RBA, which, along with rather unimpressive Chinese macro data, weighed heavily on the Australian Dollar (AUD). Other data published on Wednesday showed that Australia’s Retail Sales increased by 0.5% MoM in June as compared to the 0.6% rise in May and 0.2% expected. 

Meanwhile, China’s official Manufacturing PMI remained in contraction territory for the third straight month and edged a tad lower from 49.5 to 49.4 in July. Furthermore, the National Bureau of Statistics (NBS) Non-Manufacturing PMI declined from 50.5 in June to 50.2, as expected. The data does little to ease concerns about a slowdown in the world's second-largest economy or provide any impetus to the China-proxy Aussie. That said, the emergence of some selling around the Japanese Yen (JPY) helps limit any further downside for the AUD/JPY cross. 

The BoJ's hawkish outlook, however, favors the JPY bulls and suggests that the path of least resistance for spot prices remains to the downside. In its monetary policy statement, the Japanese central bank noted that the underlying inflation is expected to increase gradually and that the economy is recovering moderately. The BoJ added that if the outlook for economic activity and prices is realised, it will continue to raise policy rates and adjust the degree of monetary accommodation accordingly. This warrants caution before confirming a bottom for the AUD/JPY cross.