The Aussie remained range-bound against the yen yesterday following the release of weak economic data from both Australia and Japan. While Japan’s industrial production data for January was worse than expected, the Australian retail sales data for January missed estimates. Overall, the AUD/JPY pair traded between 97.46 and 97.79 in the past 24 hours.
According to the preliminary data published by Japan’s Ministry of Economy, Trade, and Industry (METI), the country’s industrial production fell by 7.50% m-o-m in January, following a 1.40% growth in the previous month and worse than forecasts of a 6.70% decline.
The reported figure reflects the steepest decline in Japan’s industrial output since May 2020. The decline was led by a 17.80% drop in the production of motor vehicles. General-purpose and business-oriented machinery fell by 12.60%. Likewise, electrical machinery, and information and communication electronics equipment recorded a decrease of 8.3%.
Correspondingly, the production index was 97.60 at the end of January.
On a y-o-y basis, Japan’s industrial production declined by 1.50% in January 2024. This is the third successive monthly contraction.
While shipments plunged 8.50% m-o-m in January, inventories decreased by 1.80% in the same period. The inventory ratio rose by 3.90% m-o-m in January.
In a separate news release, METI stated that Japan’s retail sales grew by 2.30% y-o-y in January, following a 2.40% increase in the previous month and surpassing forecasts of a 2% rise. The reported figure reflects the 23rd successive monthly increase in retail sales. The increase was led by 7.10% growth in non-store retail industries. Likewise, pharmaceuticals and cosmetics posted a growth of 7.10%. While department stores rose by 3.50%, the food and beverage sector increased by 4%.
Furthermore, Japan’s retail sales rebounded with a growth of 0.80% in January following a 2.90% decline in December.
According to Japan’s Ministry of Land, Infrastructure, Transport, and Tourism, the country’s housing starts fell by 7.50% y-o-y in January, following a 4% decline in the previous month and slightly better than forecasts of a 7.70% decrease. The reported figure reflects the eighth successive month of decline.
For the eighth month in a row, there was a decrease in the construction of new homes. The numbers fell for homes that people own by 11.0% and for pre-fabricated homes by 9.2%. On the other hand, there were increases in the construction of homes for rent by 2.7%, issued homes by 36.1%, and two-by-four homes by 11.8%.
According to the data published by the Australian Bureau of Statistics, the country’s retail sales rebounded with a growth of 1.10% m-o-m in January after a 2.10% slump in December, but missed forecasts of 1.50% growth.
The increase was led by a 2.40% rise in the sales of clothing, footwear, and personal accessories. Similarly, household goods retailing rose by 2.30% m-o-m in January. While department stores posted a growth of 1.70% m-o-m in January, cafes, restaurants, and takeaway food recorded an increase of 1.30% (or A$67.50 million) in the same period. However, food retailing inched down 0.10% (or A$10.40 million) in January.
Furthermore, Australia’s retail sales increased by 1.10% in the year ending in January.
The mixed economic data from Japan and the weak economic data from Australia are expected to keep the AUD/JPY pair range-bound for the next few trading sessions.
The historical price chart indicates that the AUD/JPY pair is descending after testing the resistance at 97.70. The next major support is anticipated to be only near 96.90. Additionally, the currency pair is trading below its 50-day moving average, while the stochastics indicator is in the bearish zone. Therefore, we anticipate the AUD/JPY pair to remain in a downtrend in the near term.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
