AUD/JPY drops below 88.00 levels on soft AUS CPI release

• A surprisingly soft Aussie headline and core inflation number is hurting the Aussie dollar in Asia
• AUD/JPY fell below 88.00 levels  

The AUD/JPY pair fell to 87.96 levels after official data showed the consumer price index rose 1.8 percent for the year, short of market expectation of 2.0 percent. Meanwhile, core inflation remained below target for a seventh straight quarter.

Key points (source: Reuters)

• Q3 consumer price index +0.6 pct q/q (median market forecast +0.8 pct)
• Q3 consumer price index +1.8 pct y/y (forecast +2.0 pct)
• Q3 trimmed mean +0.4 pct q/q (forecast +0.5 pct)
• Q3 trimmed mean +1.8 pct y/y (forecast +2.0 pct)
• Q3 weighted median +0.3 pct q/q (forecast +0.5 pct)
• Q3 weighted median +1.9 pct y/y (forecast +2.0 pct)

A weak inflation print means the low odds of RBA pushing rates higher in 2018. It also validates the RBA's view that there is no automatic reason to follow global rate hikes.

AUD/JPY Technical Levels

The pair was last seen trading around the session low of 87.95. A break below 87.87 (50-DMA) would open doors for 87.30 (61.8% Fib R of Aug low - Sep high) and 87.00 (zero levels).  On the higher side, breach of resistance at 88.39 (1-hour 200-MA) could yield a re-test of 88.70 (1-hour 100-MA) and 88.00 (zero levels).