AUD/JPY - Upside capped at Friday's high ahead of China PPI & CPI

AUD/JPY is well bid in Asia, but is struggling to break above Friday's high of 88.31 as investors await the release of the Chinese monthly consumer price index (CPI) and producer price index (PPI).

Strong PPI could boost the Aussie

The PPI is seen rising 6.3% year-on-year in September. It is the pass-through of China’s rising costs via exports that lifts inflation expectations in the US and other parts of the world. Thus, a better-than-expected PPI could strengthen the "reflation trade" narrative and boost demand for the risk assets like the Aussie.

Meanwhile, the CPI is seen rising 0.4% month-on-month and 1.6% year-on-year. The Japanese Yen may remain weak on election uncertainty, although escalation of tensions in the Korean Peninsula might trigger risk-off and lead to JPY strength.

AUD/JPY Technical Levels

The cross was last seen trading around 88.25 levels. A break above Friday's high of 88.31 would open doors for 88.74 (Oct 5 high) and 89.00 levels. On the downside, breach of support at 88.10 (session low) could yield a sell-off to 87.90 (10-DMA) and 87.85 (5-DMA).