The AUD/JPY cross sharply rebounded from the 97.20 level, which marked a two-week low recorded on Friday and confirmed during Tuesday's and Wednesday's Asian sessions, following the release of fresh Australian consumer inflation data. Spot prices set a new weekly high, breaking through the round 98.00 handle, but later pulled back.

According to the Australian Bureau of Statistics (ABS), the Consumer Price Index (CPI) rose 3.0% year-to-date as of August, surpassing July's 2.8% and beating expert forecasts of 2.9%. This data strengthens the expectation that the Reserve Bank of Australia (RBA) will refrain from raising rates at the upcoming meeting.

This creates favorable conditions for the Australian dollar, which, combined with yen weakness, is supporting gains in the AUD/JPY cross. Meanwhile, Japan's Manufacturing PMI (S&P Global) showed the sharpest drop since March, falling in September to 48.4 from 49.7 in August. The negative data is compounded by concerns over economic challenges caused by US tariffs and domestic political instability, which could prompt the BOJ to delay any rate hikes and further weaken the yen.

Nevertheless, investors are still pricing in the possibility of a 25-basis-point rate hike by the BOJ in October, based on signs of economic resilience. In contrast, the market sees an approximately 70% chance of an RBA rate cut in November, which is a significantly different stance compared to the BOJ's more aggressive outlook.

A slight deterioration in global risk sentiment could support the yen as a safe-haven currency, which would limit the upside for risk-sensitive currencies, including the Australian dollar. Under these uncertain circumstances, it is advisable to exercise caution and wait for confirmation that the corrective move in AUD/JPY from above the 98.00 level is over and that a path for renewed gains is opening up.

From a technical standpoint, prices are trading above the 9-day EMA, confirming the strength of the momentum. The oscillators on the daily chart are also positive, indicating that the path of least resistance for AUD/JPY should be upward.

However, if prices fail to hold the key support zone of 97.20–97.00, the odds may shift in favor of the bears.