AUD/JPY regains positive traction, though it remains confined in a familiar range.
The Aussie bulls reacted little to China’s Services PMI, which rose to 51.1 in May.
The divergent BoJ-RBA policy outlooks should contribute to capping spot prices.
The AUD/JPY cross attracts fresh buyers during the Asian session on Thursday and for now, seems to have stalled the previous day's retracement slide from the 93.60 area, or the weekly high. Spot prices move little following the release of Chinese data and currently trade around the 92.85-92.90 region, up 0.20% for the day.
In fact, a private survey showed that China's services activity expanded at a slightly faster pace in May, with the Caixin Services Purchasing Managers' Index (PMI) inching higher to 51.1 from 50.7 in April. The data matched consensus estimates and failed to provide any meaningful impetus to the China-proxy Australian Dollar (AUD). However, hopes for potential talks between US President Donald Trump and Chinese President Xi Jinping continue to act as a tailwind for the Aussie, lending some support to the AUD/JPY cross.
Meanwhile, a modest US Dollar (USD) uptick exerts some downward pressure on the Japanese Yen (JPY), which contributes to the intraday move higher. However, the growing acceptance that the Bank of Japan (BoJ) will continue raising interest rates holds back the JPY bears from placing aggressive bets. The bets were reaffirmed by data showing that Japan's real wages fell for the fourth consecutive month in April amid stubborn inflation. This, along with geopolitical risks, should limit JPY losses and cap the AUD/JPY cross.
Apart from this, the Reserve Bank of Australia's (RBA) dovish tilt should contribute to keeping a lid on the AUD. Even from a technical perspective, the recent range-bound price action witnessed over the past two weeks or so warrants some caution before positioning for the next leg of a directional move. Hence, a sustained move and a daily close above the 93.00 round figure is needed to back the case for any further near-term appreciating move amid persistent trade-related uncertainties and US-China trade war fears.
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