AUD/JPY struggles to justify robust Australian Retail Sales, as yields approach 95.00

Despite Australia's July Retail Sales increase, which was released during Monday's Asian session, AUD/JPY continues to fall from a multi-day high. As the cross-currency pair approaches 95.00, it halts its drop from the daily high.

In spite of this, Australia's seasonally adjusted Retail Sales grew 1.3% month-over-month in July, above 0.3% market forecasts and 0.2% previously.

Notably, despite the recent increase, the cross-currency pair, also known as the risk barometer, remains only marginally bid, as the market fears an economic slowdown in reaction to aggressive rate hikes by the major central banks. This disregards the recent seven basis point (bps) increase in US Treasury yields to 3.106%.

Haruhiko Kuroda, governor of the Bank of Japan (BOJ), may have made similar statements over the weekend. Reuters reported that Bank of Japan (BOJ) Governor Haruhiko Kuroda remarked over the weekend at the Kansas City Fed's annual conference in Jackson Hole Symposium, Wyoming that the central bank will likely continue its accommodating policy in Japan.

The underlying cause may be tied to the safe-haven character of the Japanese yen, as well as earlier dovish comments by the Reserve Bank of Australia (RBA) and the most recent US-China confrontation. The Japanese government's willingness to increase stimulus could exert additional negative pressure on the AUD/JPY exchange rate.

In order to assess the short-term movements of the cross-currency pair, AUD/JPY traders should await unequivocal signals from the monetary policy authorities of Australia and Japan, in addition to keeping an eye on the recently heightened recession concerns amid rate hike fears.

Triple peaks near 95.75-80 tempt AUD/JPY bears, but a convincing break of a three-week-old support line, which was at 94.45 at the time of writing, is required for a bearish tilt.