AUD/JPY Downbeat Data and Cautious Sentiment Weigh.

The AUD/JPY currency pair continues to face downward pressure, hovering around its intraday low after experiencing a decline from its eight-day high. The pair's movement is influenced by the release of key economic data, including Australia's employment report and Japan's trade numbers for the month of April. As the AUD/JPY pair is considered a risk barometer, qualitative factors will play a significant role in determining its direction, particularly due to the light economic calendar.

The AUD/JPY pair is currently experiencing selling pressure, pushing it to refresh its intraday low near 91.20. This rapid decline amounts to nearly 50 pips, triggered by the disappointing Australian jobs report for April, which came in below expectations. Furthermore, the pair is also weighed down by the negative yield and cautious sentiment prevailing in the market.

Australia's employment change figure for April came as a surprise, showing a decline of 4.3K jobs compared to the expected increase of 25K and the previous month's figure of 53K. Additionally, the unemployment rate in Australia rose to 3.7% from the previous 3.5%.

Earlier in the day, Japan's merchandise trade balance total for April showed improvement, reaching ¥-432.4B, surpassing the expected ¥-613.8B and the previous month's ¥-755.1B. However, both imports and exports for April experienced a decline on a year-on-year basis, with imports contracting by 2.3% and exports growing by 2.6%, falling short of market forecasts of -0.3% and 3.0% respectively. These figures represent a decrease from the previous month's values of 7.3% and 4.3% for imports and exports respectively.

On the previous day, Australia's wage price index for the first quarter of 2023 remained unchanged at 0.8% quarter-on-quarter (QoQ), failing to meet the market consensus of 0.9%. However, the year-on-year (YoY) numbers showed improvement, reaching 3.7%, surpassing the expected 3.6% and the previous reading of 3.3%. In contrast, Japan's preliminary reading of the first quarter (Q1) 2023 gross domestic product (GDP) figures revealed a growth rate of 0.4%, exceeding the market's expectation of 0.1% and the previous reading of 0.0%.

It is worth noting that the AUD/JPY pair's recent upward momentum was driven by the market's improved risk appetite, mainly due to diminishing concerns regarding a US default. Additionally, hopes of increased investment from China also supported the pair's recovery, as the National Development and Reform Commission of the People's Republic of China (NDRC) announced measures to stimulate consumption and stabilize and expand manufacturing investment.

However, the lack of further positive catalysts, along with a cautious sentiment ahead of significant Australian data and doubts regarding the Reserve Bank of Australia's (RBA) hawkish stance, has led the risk barometer pair to consolidate its weekly gains.

Despite the positive performance on Wall Street, S&P 500 Futures show slight losses, and US Treasury bond yields remain stagnant near multi-day highs. Specifically, the yields on the 10-year and two-year Treasury bonds have risen to their highest levels since May 01 and April 24 respectively, with a four-day uptrend near 3.57% and 4.16%. However, they have slightly decreased to 3.55% and 4.13% respectively at the time of writing.

Looking ahead, with a light economic calendar, the AUD/JPY pair may consolidate its recent gains if market sentiment continues to deteriorate.

From a technical analysis standpoint, it is worth considering that the price of AUD/JPY may experience a new pullback around the 50% and 61.8% Fibonacci retracement levels. These levels coincide with the dynamic trendline, adding to their significance. This potential pullback could serve as a temporary pause in the downward movement before the price resumes its upward trajectory.

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