Aud/JPY softens from a maximum of six months as Yen strengthens on all fronts

• The AUD/JPY falls more than 1% from the maximum of six months of 97.43 on Tuesday.
• The Japanese Yen is widely strengthened while the yield of the government bonds rises to 1.6%, the highest level since 2008.
• The June Australian Employment Report will be published on Thursday, with the markets waiting for a gain of 20,000 jobs and that the unemployment rate is stable at 4.1%.

The Australian dollar (AUD) is withdrawing in front of the Japanese Yen (JPY) on Wednesday, since Yen is widely strengthened against the main currencies. After a constant increase since last week, the Aud/JPY torque is now below 1% from the maximum of six months of 97.43 on Tuesday, a level that was not seen since January 28. At the time of writing, the pair is being negotiated about 96.40 during the American trading session.

The Japanese Yen rebound occurs while the performance of the Japanese government bonds at 10 years rises to 1.6%, its highest level since 2008. The increase in yields occurs while markets anticipate an increase in fiscal spending before elections, with speculation around possible stimulation measures, including a possible reduction in consumption tax to boost economic activity.

Meanwhile, the Australian dollar is experiencing a slight setback, driven by the benefit and fading of the impulse after a strong streak. The rally seems to be stagnating as the technical indicators cool. Notably, the relative force index (RSI) in the daily chart has decreased from the overcompra zone, suggesting that the torque is crossing a short -term technical correction.

Looking ahead, traders will focus their attention on the June Australian Employment Report, which will be published on Thursday. The labor market data will be crucial to shape the expectations around the next monetary policy steps of the Australian Reserve Bank (RBA). The markets predict a gain of approximately 20,000 jobs, while the unemployment rate is expected to remain stable at 4.1%, in line with the May figure. Last month’s report showed a small loss of employment in general, but revealed a strong increase in full -time employment, underlining the underlying resilience of the labor market.

A robust employment report could give RBA more confidence to maintain its current interest rate or delay relief, especially after two consecutive reductions carried the interest rate to 3.85% this year. However, a weak reading, particularly if combined with an increase in unemployment, could rekindle moderate bets and exert additional pressure on the aussie.

Currently, the markets are valuing an 80% probability of a cut of a quarterfinal in August, although much will depend on the report of the Consumer Price Index (IPC) of the second quarter that will be published at the end of July.

On the Japanese side, attention will focus on the main macroeconomic data later this week. Japan trade balance data will be published on Thursday, followed by the National Consumer Price Index (CPI) report on Friday. Both publications will provide new perspectives on the health of the Japanese economy and can influence expectations about the management of the Bank of Japan (BOJ). Strong IPC figures could add recent pressure on Japanese yields, further supporting Yen and potentially adding down the AUD/JPY with a short term.