AUD/JPY slides below 91.00 on downbeat Aussie Retail Sales, mixed Japan inflation and risk aversion

• AUD/JPY justifies its risk barometer status at weekly low, prints four-day downtrend.
• Australia Retail Sales for April eased below forecast and prior, Tokyo inflation came in mixed.
• Market sentiment worsens amid US default fears, propel yields.
• Mixed signals from BoJ, Japan’s economic optimism versus RBA’s hesitance also weigh on cross currency price.

AUD/JPY fades bounce off the intraday low after Australia Retail Sales growth stagnated in April, per the data released early Friday. In doing so, the cross-currency pair drops for the fourth consecutive day while poking the 90.90 level by the press time. Apart from the downbeat Aussie data, challenges to the risk profile and mixed Japan inflation numbers, as well as promising signals from Tokyo, also weigh on the risk barometer pair.

Australia's Retail Sales growth dropped to 0.0% in April versus 0.2% market forecasts and 0.4% prior. It should be noted that the RBNZ’s failure to impress the markets with 0.25% rate hike, mainly due to the unchanged peak rate forecasts, raised fears of the Reserve Bank of Australia’s (RBA) policy pivot and weigh on the Australian Dollar (AUD) in the last two days.

Earlier in the day, Tokyo Consumer Price Index (CPI) eased to 3.2% YoY from 3.5% previous readings and 3.9% market forecasts. On the same line is the Tokyo CPI ex Fresh Food while the Tokyo CPI ex Food, Energy edged higher but stays below the market forecasts for the said month.

Talking about the risk, the looming fears of the US default also allow the US Dollar to dominate. Recently, US House Speaker Kevin McCarthy announced no agreement on the debt deal, as well as the continuation of talks by saying, “It’s hard. But we’re working and we’re going to continue to work until we get this done.”

It should be noted that the recent hawkish concerns about the Bank of Japan’s (BoJ) next move, backed by Governor Kazuo Ueda’s latest comments and economic optimism in the nation, also exert downside pressure on the AUD/JPY price.

On Thursday, Bank of Japan (BoJ) Governor Kazuo Ueda said that they could tweak the Yield Curve Control (YCC) strategy if the balance between the benefit and the cost of the policy were to shift, as reported by Reuters. Further, the Japanese Cabinet Office released the monthly assessment report on Thursday and raised the overall economic view for the first time since July 2022 in May. The government report also noted that the economy is 'recovering moderately'.

Amid these plays, S&P500 Futures print mild losses whereas the US 10-year and two-year Treasury bond yields seesaw near the early March highs of around 3.82% and 4.54% in that order. Hence, the risk profile is sour and keeps the AUD/JPY bears hopeful.

Technical analysis

A daily closing below a three-week-old ascending support line, now resistance around 91.15, directs AUD/JPY price toward the 100-DMA of 90.40.