AUD/JPY regains 80.00 as sentiment improves, focus on RBA

AUD/JPY holds onto the week’s start rebound from over three-month lows, firmer around 80.05 during early Tuesday morning in Asia. The risk barometer pair portrays upbeat market sentiment as traders await monetary policy meeting decision of the Reserve Bank of Australia (RBA).

Be it the market’s consolidation of Friday’s risk-aversion or cautious optimism surrounding the South African variant of the coronavirus, not to forget monetary policy easing from the People’s Bank of China (PBOC), AUD/JPY had it all to post the biggest daily jump in two months. Also adding to the pair’s strength were the firmer prints of the second-tier Aussie data and Japan’s push for record fiscal stimulus.

Market sentiment improves at the week’s start even as the US Treasury yields remained firmer. The reason could be linked to the ex-Fed group of central bankers’ readiness to extend easy money policies due to the South African covid strain, dubbed as Omicron. Also positive were the absence of more deaths compared to the rapid increase in the virus variant, as well as global scientists’ hopes of finding a cure to the fresh challenge.

Elsewhere, the PBOC announced RRR cut and propelled multi-billion dollars into the market while Japan’s policymakers are debating the record stimulus to battle the covid-linked economics losses.

On the same lines were the upbeat Australia TD Securities Inflation and ANZ Job Advertisements for November. While the former data rose past 0.2% to 0.3% MoM, the latter rallied beyond 6.2% previous readouts to 7.4%.

Alternatively, Japanese PM Fumio Kishida’s comments suggest that the virus-led lockdowns can return to the nation if the conditions worsen join the Fed rate hike concerns to weigh on the AUD/JPY prices.

Amid these plays, the US 10-year Treasury yields rose over nine basis points (bps) to 1.43%, after Friday’s 13 bps fall, whereas the Wall Street benchmarks also recovered the losses made during the last week.

While risk-on mood underpins the AUD/JPY prices, the cross-currency pair is likely to remain sidelined ahead of the RBA verdict. The Aussie central bank is likely to keep its benchmark rate at 0.10% and the weekly bond purchases of $4.0 billion intact. However, discussion surrounding the bond tapering and Omicron in the RBA Statement will be important to watch for clear direction. Above all, risk catalysts are crucial for the quote traders to follow for fresh impulse.

Read: Reserve Bank of Australia Preview: Market players looking for tightening hints

Technical analysis

A clear upside break of a weekly resistance line enables AUD/JPY buyers to aim for a 10-DMA level surrounding 80.75 but December 01 swing top and five-week-old resistance line near 81.90 will challenge the bulls afterward. Meanwhile, September’s low around 78.85 holds the for fresh downside targeting the yearly bottom surrounding 77.90.