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China just printed weaker-than-expected CPI numbers, and these might cut the Aussie’s rally short.

Will the resistance on AUD/JPY hold?

Before moving on, ICYMI, yesterday’s watchlist checked out a fresh moving average crossover on AUD/USD. Be sure to check out if it’s still a valid play!

And now for the headlines that rocked the markets in the last trading sessions:

Fresh Market Headlines & Economic Data:

U.S. NFIB Small Business Index up from 89.5 to 89.9

API reported surprise build of 2.156M barrels in crude oil inventories

Japanese producer prices slowed from 9.4% to 8.6% gain

Chinese CPI rose from 2.5% to 2.7% vs. 2.9% forecast

Chinese PPI slumped from 6.1% to 4.2% vs. 4.9% consensus

Partial lockdowns announced in Chinese province of Xinjiang

German final CPI reading unchanged at 0.9% as expected

Upcoming Potential Catalysts on the Forex Economic Calendar:

U.S. headline and core CPI at 12:30 pm GMT
U.S. crude oil inventories at 2:30 pm GMT
New Zealand visitor arrivals at 10:45 pm GMT
Australia’s MI inflation expectations at 1:00 am GMT (Aug. 12)

Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! 🔥 🗺️

What to Watch: AUD/JPY

AUD/JPY 4-hour Forex Chart

AUD/JPY 4-hour Forex Chart

Aussie bulls, watch out!

AUD/JPY has been on a tear lately but is closing in on the top of its descending channel that’s been holding since mid-June.

Will the downtrend continue from here?

Technical indicators are looking mixed so far, with Stochastic starting to head south from the overbought area and the moving averages still pointing to more gains.

The 100 SMA is above the 200 SMA to indicate that the path of least resistance is to the upside, and it looks like the former is holding as dynamic support as well.

Fundamentals are suggesting a return in bearish vibes for the Aussie, though, as the latest round of Chinese inflation data turned out weaker than expected. Producer prices are even pointing to much lower price pressures down the line for Australia’s top trading partner.

The spotlight now shifts to the U.S. CPI release in the upcoming session, and this report might indirectly impact yen pairs if market sentiment changes.

In particular, a pickup in risk-off flows could favor the lower-yielding Japanese currency while risk-taking could mean more upside for the Aussie.

Either way, keep an eye out for reversal or breakout candlesticks at the channel top!