AUD/JPY clings to weekly high ahead of Japan inflation, RBA’s Lowe’s speech

• AUD/JPY looks for direction around the highest in a week ahead of key data/events.
• Trade/Brexit headlines propel the market’s risk-tone off-late.
• Other than Japan’s Tokyo CPI numbers and comments from RBA’s Lowe, second voting on UK PM’s election motion will be the key.

Following a day filled with risk-on sentiment, mainly based on receding odds of a no-deal Brexit and rising optimism surrounding the US-China trade deal, the AUD/JPY pair looks for direction while taking rounds to 74.51 by early Tuesday morning in Asia.

Weekend news that the US-China are nearing to finalize the “Phase One” trade deal initially welcomed global traders on Monday. The risk-tone was further lightened by trade positive comments from the United States’ (US) President Donald Trump and the latest announcement to consider exclusion of certain Chinese imports for tariff increase relaxation from November 01.

Elsewhere, the European Union (EU) officially announced a flexible Brexit extension till January 2020 versus the October 31 deadline and the United Kingdom’s (UK) Prime Minister (PM) Boris Johnson failed to gain support for a snap election in late-2019.

With both the key market drivers flashing upbeat signals, the US 10-year Treasury yield gains nearly five basis points (bps) to 1.85% and Wall Street cheered the optimism by the press time.

While trade/Brexit headlines will keep the driver’s seat, Japan’s October month Tokyo Consumer Price Index (CPI) and CPI ex Fresh Food, followed by comments from the Reserve Bank of Australia (RBA) Governor Philip Lowe, will be the key to watch immediate direction. The Tokyo CPI is expected to soften from 0.4% YoY figure to 0.5% prior while the Core reading might rise to 0.7% versus 0.5% earlier. As for the RBA’s Lowe’s speech, Westpac says, “With the RBA Board meeting only a week away, he may not be inclined to deliver a strong message on near term policy.”

Technical Analysis

Unless successfully breaking monthly top of 74.83, prices are less likely to aim for July month low near 75.15, which in turn highlights the importance of a 100-day Exponential Moving Average (EMA) level of 74.03 during the pullback.