AUD/JPY drops to 6-1/2 week low on weak Aussie PPI

• AUD remains on the back foot on fading prospects of RBA tightening
• AUD/JPY drops to 100-day MA, Aussie PPI misses estimates

The AUD/JPY cross fell to a 6-1/2 week low of 87.17 in Asia as bets on delayed RBA tightening dent Aussie dollar.

The currency pair hit an Intraday high of 87.46 earlier today before falling below 87.30 (61.8% Fib R of Aug/Sep rally).  The Aussie third quarter Producer Price Index (PPI) cooled to 0.2 percent q/q from the previous figure of 0.5 percent. The annualized figure fell to 1.6 percent from 1.7 percent.

The data released earlier this week showed the Australian consumer prices were surprisingly tame last quarter, while core inflation stayed below target for almost a second full year. Meanwhile, the import price index released yesterday also pointed to the disinflationary impact of the strong Aussie.

The subdued price pressures have forced investors to pare back the already slim chance of RBA rate hike for months to come.

AUD/JPY Technical Levels

The pair was last seen trading around 87.20 levels. A break below 87.00 (psychological figure) would open doors for 86.67 (Sep. 8 low) and 86.56 (Sep. 6 low). On the higher side, breach of resistance at 87.30 (61.8% fib) would expose 87.46 (session high), above which a major hurdle is seen directly at 87.84 (5-DMA + 50-DMA).