• AUD/JPY extends the descent for the second consecutive day amid a broadly weaker Aussie.
• Wednesday’s softer consumer inflation tempers RBA rate hike bets and undermines the AUD.
• Hawkish BoJ expectations and intervention fears support the JPY, contributing to the decline.

The AUD/JPY cross extends the previous day's retracement slide from the 114.35 area, or a nearly two-week high, and attracts some follow-through selling for the second consecutive day on Thursday. Spot prices, however, rebound a few pips from the weekly through and trade just above mid-113.00s during the early European session.

The Australian Dollar (AUD) continues with its relative underperformance amid reduced bets for further interest rate hikes by the Reserve Bank of Australia (RBA). In fact, traders trimmed their bets for a rate hike at the June RBA meeting in the wake of dismal Australian employment details for April and softer-than-expected consumer inflation figures. This, in turn, undermines the Aussie and turns out to be a key factor exerting downward pressure on the AUD/JPY cross.

The Japanese Yen (JPY), on the other hand, draws support from hawkish Bank of Japan (BoJ) expectations. In fact, BoJ Deputy Governor Himino Ryozo said on Tuesday that the central bank will continue to raise the policy rate based on economic activity, prices, and financial conditions. Adding to this, speculations that Japanese authorities will step in again to prop up the domestic currency further support the JPY and contribute to the offered tone surrounding the AUD/JPY cross.

The JPY bulls, however, seem hesitant amid concerns that Japan's economy will come under substantial strains due to the continued disruption to energy supplies through the Strait of Hormuz. This limits the downside for the AUD/JPY cross, making it prudent to wait for strong follow-through selling before positioning for the resumption of the recent retracement slide from the 114.70-114.75 area, or a multi-decade high touched earlier this month.