FX.co ★ AUD/JPY

The Australian Dollar (AUD) is trading up 0.13 percent to 114.30 against the Japanese Yen (JPY) during European trading hours on Wednesday. The pair moves higher, with the Australian Dollar (AUD) outperforming after investors lifted their expectations for an interest rate increase by the Reserve Bank of Australia (RBA) following the release of July CPI data that beat estimates. Deutsche Bank analysts point out that the latest inflation figures from Australia were more robust than initially expected, with the "headline CPI increase +3.5% yoy in July, lower than 3.8% in June, but definitely above expectations of +3.3%." They point out that "trimmed mean CPI was higher at +3.6% (instead of expected 3.5%)." As Deutsche Bank notes, this upside surprise has quickly affected policy expectations: "Following the release, traders have increased pricing of an RBA rate hike at the September 28-29 meeting from 10% to 32%." Further adding to the aforementioned expectation, "our Australian economist has now moved to expect a 25bps September hike by the RBA, versus his earlier call for a pause for the rest of the year (see here)." On Tuesday, the minutes of the RBA's policy meeting revealed that some members of the board consider it quite likely that an interest rate hike may be needed, should there be any risk of upside inflation. Despite being lower than the antipodean currency, JPY outperforms its peers owing to strong expectations that the BoJ will hike interest rates at its upcoming September meeting. The AUD/JPY is trading at 114.18. In terms of the short-term direction, there is a positive bias as the price has moved above the 20-period Exponential Moving Average (EMA) of 113.09. In addition, the RSI of 62.38 is in positive territory and indicates upward buying pressure, though not yet in the overbought region. Support is found at the 20-day EMA at 113.09, which should serve as a dynamic level of support. This means that as long as the cross stays above this level, buyers will be in control and have a chance to push it higher while the trend is in play. Resistance is expected at the 114.66-114.93 level.