AUD/JPY recovers post-RBA losses as 10-yr bond yield keeps gains

AUD/JPY suffered a knee jerk sell-off to an Intraday low of 88.12 after RBA expressed worries regarding AUD exchange rate, but quickly recovered losses to test 1-hour 100-MA hurdle of 88.56. 

A higher Aussie leads to disinflation

The RBA statement says, “the higher AUD could lead to subdued price pressures, weigh over the outlook for output and employment”. The central added that headline inflation rates have declined recently, but assured markets that price pressure are still expected to increase gradually. 

Forecasts for the Australian economy were held largely unchanged. The statement also expressed concerns regarding domestic consumption, housing debt and housing market slowdown. 

Consequently, the AUD was initially offered; however, the 10-year Aussie yield still hovers into the positive territory; currently up 3 basis points at 2.724%. The resilience in the bond yield seems to have helped the AUD/JPY cross regain the bid tone. 

AUD/JPY Technical Levels

The cross was last seen trading around 88.50 levels. A break above 88.56 [1-hour 50-MA] would open up upside towards 88.70 [session high] and 89.00 [psychological figure]. On the downside, breach of support at 88.33 [1-hour 50-MA] could yield a sell-off to 87.86 {July low] and 87.62 [23.6% Fib R of 81.78-89.42].