• AUD/JPY retreats from a nearly two-week high as softer Australian inflation data weighs on the AUD.
• Intervention fears underpin the JPY and contribute to the slide, though the downside seems limited.
• Bets for a rate hike by the RBA in August could support the Aussie and help limit losses for spot prices.

The AUD/JPY cross attracts some intraday sellers following a modest Asian session rise to the 114.35 area, or a nearly two-week top, in reaction to softer Australian consumer inflation figures. Spot prices slide to sub-114.00 levels in the last hour and, for now, seem to have snapped a two-day winning streak, though the downside seems limited.

The Australian Bureau of Statistics (ABS) reported that the headline Consumer Price Index (CPI) slowed from the 4.6% YoY rate in March to 4.2% in April. The reading, however, remains well above the Reserve Bank of Australia’s (RBA) 2% to 3% target and backs the case for a further rate hike at the August meeting. This, in turn, could underpin the Australian Dollar (AUD) and act as a tailwind for the AUD/JPY cross.

The Japanese Yen (JPY), on the other hand, draws some support speculations that Japanese authorities will step in again to prop up the domestic currency. However, worries that Japan's economy will come under substantial strains due to continued disruptions to energy supplies from the Middle East might hold back the JPY bulls from placing aggressive bets and help limit the downside for the AUD/JPY cross.

The aforementioned fundamental backdrop suggests that the corrective decline might still be seen as a buying opportunity and remain limited. Hence, it will be prudent to wait for strong follow-through selling before confirming that spot prices have topped out near the 114.70-114.75 region, or a multi-decade high touched earlier this month, and positioning for any meaningful depreciation move in the near term.