AUD/JPY extends higher to near 97.00 as jobs report bolsters sentiment from RBA calls

• AUD/JPY gains ground after Thursday’s employment data release.
• Fed Chairman Powell’s comments tempered optimism, preventing stronger risk-sensitive currencies such as the AUD.
• The upside of the currency cross could be limited as the JPY receives support from the BoJ.

AUD/JPY continues its fourth straight day of gains, trading around 97.10 in early European hours. The Australian dollar (AUD) received support following Thursday’s labor market report.

Employment change in Australia rose to 47.5k in August, down from 58.2k in July but significantly above the consensus forecast of 25.0k. The unemployment rate held steady at 4.2% in August, in line with both expectations and the previous month’s figure, according to data released by the Australian Bureau of Statistics (ABS).

Wednesday’s 50 basis point interest rate cut by the US Federal Reserve (Fed) may have boosted market confidence and supported risk-sensitive currencies such as the Australian dollar. However, Fed Chairman Jerome Powell’s comments tempered optimism, preventing a stronger sense of risk in markets.

Fed Chairman Powell said at the post-meeting press conference that the Fed was in no rush to ease policy and stressed that half-percentage-point cuts were not the “new pace.” In addition, Fed policymakers raised their long-term projection for the federal funds rate from 2.8% to 2.9%.

The upside of the AUD/JPY cross could be limited as the Japanese yen (JPY) receives support from hawkish sentiment around the Bank of Japan (BoJ). Traders are anticipating the BoJ’s policy decision, with rates expected to remain unchanged, leaving room for potential future rate hikes.

In addition, Japan’s National Consumer Price Index (CPI) data will be closely monitored as the inflation report could provide new insights into the future path of the Bank of Japan’s (BoJ) interest rate.