AUD/JPY fails to extend gains on above-forecast Aussie inflation

• AUD/JPY is keeping early gains post the better-than-expected Aussie inflation data. 
• RBA is unlikely to change its dovish stance due to the uptick in price pressures in Q1. 
• Risk-on favors further gains in the AUD/JPY pair.

While the Aussie dollar remains bid, the AUD/JPY pair is struggling to extend gains on the back of a better-than-expected Aussie data released at 01:30 GMT. 

The cost of living in Australia, as represented by the Consumer Price Index, rose 2.2% year-on-year in the first quarter, beating expectations for a 2% rise, having increased by 1.8% in the final three months of 2019. The quarter-on-quarter figure came in at 0.3%, versus expectations of a 0.2% rise and down from the previous quarter's 0.7%.

The Reserve Bank of Australia's Trimmed Mean CPI or core inflation rose 0.5% quarter-on-quarter in the first quarter compared to expectations for an unchanged reading of 0.4%. The annualized figure also bettered estimates by printing at 1.8%. 

The AUD/JPY pair rose from 69.31 to 69.55 ahead of the day and is trading around session highs at press time. So far, the pair has failed to cheer the bigger-than-expected rise in inflation. 

Moreover, demand-side pressures may have led to a rise price pressures, as Australia witnessed panic buying in the wake of the coronavirus outbreak in March. Further, the uptick is likely to be short-lived, as the recent crash in oil prices is likely to send a wave of deflation across the globe. 

Put simply, the RBA is unlikely to reassess its dovish stance due to the first quarter inflation figures. That said, the AUD/JPY pair could continue to rise during the day ahead if the global equities trade risk-on, as suggested by the 1% gain in the S&P 500 futures. 

Technical levels