- AUD/JPY gains strong positive traction on Tuesday, though the upside potential seems limited.
- The AUD strengthens after the RBA decided to leave the Official Cash Rate (OCR) unchanged.
- China’s economic woes and geopolitical risk might keep a lid on any further gains for the cross.
The AUD/JPY cross attracts some dip-buying near the 96.25 region during the Asian session on Tuesday and jumps to a fresh daily peak after the Reserve Bank of Australia (RBA) announced its policy decision. Spot prices currently trade around the 96.70 region, though remain confined in a familiar range held over the past three days.
The Australian Dollar (AUD) strengthens a bit after the RBA, as was widely anticipated, decided to keep the Official Cash Rate (OCR) unchanged at the end of the February meeting. In the accompanying policy statement, the RBA noted that wage growth has picked up but is not expected to increase much further and remains consistent with the inflation target. Furthermore, the RBA published new economic forecasts and now sees 2024 GDP growth at 1.8% as compared to the 2% estimated previously. This, in turn, suggests that the RBA's tightening cycle is over and that the next move would be down, which might hold back bulls from placing aggressive bets around the AUD/JPY cross.
Apart from this, persistent worries about slowing economic growth in China might further contribute to keeping a lid on the China-proxy Aussie. Moreover, the risk of a further escalation of geopolitical tensions in the Middle East might continue to benefit the Japanese Yen's (JPY) relative safe-haven status and contribute to capping the AUD/JPY cross. The downside, however, seems cushioned in the wake of comments from China's sovereign wealth fund, saying that they will increase the investment of China stock ETFs and are determined to safeguard the stable operation of the market. Hence, acceptance below the 100-day SMA is needed to confirm a bearish breakdown.
Technical levels to watch
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