AUD/JPY Cross Gains Momentum, Surpassing 100-hour SMA after Hitting Two-day High

The AUD/JPY cross is showing signs of momentum, pushing past the 100-hour Simple Moving Average (SMA) and reaching a two-day peak. This trend mirrors the progress of the EUR/USD pair, which is also advancing towards a fresh 2023 high close to 1.1150. The performance of both pairs has been influenced by a general weakening of the US dollar.

The AUD/JPY cross has managed to ascend to a two-day high, notably breaking through the 100-hour SMA. Market observers are now keenly waiting for the release of the Producer Price Index (PPI), an important economic indicator due later today.

Meanwhile, recent data from the US Bureau of Labor Statistics (BLS) reveals that the country’s Consumer Price Index (CPI) fell to 3% year-on-year in June, down from 4% in May. This figure came in slightly lower than the market estimate of 3.1%. Concurrently, core CPI inflation, which excludes unpredictable food and energy costs, slipped from 5.3% to 4.8%. Despite these decreases, both the CPI and core CPI saw monthly increases of 0.2%, not quite meeting analysts’ forecasts.

In response to these milder inflation figures, the US Dollar faced renewed selling pressure. As a result, the US Dollar Index (DXY), a measure of the dollar’s performance against six major currencies, dropped to its lowest level since April 2022, just over the 100.50 mark.

The inflation data indicates a potential easing of inflationary pressures in the US economy. With the next Federal Open Market Committee (FOMC) meeting scheduled for July 25-26, the market is expecting a rate hike. However, the likelihood of more rate hikes by the end of the year has decreased significantly.

In Europe, the European Central Bank (ECB) is maintaining a hawkish stance due to ongoing inflationary pressures in the Eurozone, and is likely to raise its policy rates by a quarter percentage point later this month. Final inflation figures for June, measured by the Consumer Price Index (CPI), showed a month-on-month increase of 0.3% in Germany and a year-on-year rise of 1.9% in Spain.

Investors will be closely watching another set of US inflation data due to be released on Thursday. The Producer Price Index (PPI) is projected to fall from 6.6% to 6.1% annually, with the core figure expected to decrease from 5.3% to 4.8%. Furthermore, the ECB is set to release the minutes of its most recent meeting on Thursday, providing additional insights into its monetary policy direction.