The AUD/JPY cross continued its upward trajectory on Wednesday, marking a second consecutive day of gains and reaching its highest level in over a week during the Asian session. However, the pair struggled to maintain momentum above the key 101.00 round figure, retreating closer to its daily range’s lower end near the 200-day Simple Moving Average (SMA) in the final hour.
Yen Weakness and Risk-On Sentiment Support AUD/JPY
The Japanese Yen (JPY) remains relatively weak, as market expectations suggest that Japan’s political landscape may complicate the Bank of Japan‘s (BoJ) ability to raise interest rates further. Additionally, the risk-on sentiment fueled by early exit polls in the US election, indicating a lead for former President Donald Trump, has diminished demand for the safe-haven Yen, benefiting the AUD/JPY cross.
Chinese Stimulus and RBA Hawkishness Provide Support for AUD
Recent data from China showing improvement in business conditions due to government stimulus measures has added further support to the Australian Dollar (AUD). Moreover, the Reserve Bank of Australia‘s (RBA) hawkish stance continues to back the AUD, contributing to the pair’s strength.
BoJ Meeting Minutes Limit Further Upside
Despite these supportive factors, the BoJ meeting minutes, which left the door open for potential policy tightening, have capped further gains for the AUD/JPY pair.
Technical Outlook: Caution Prevails Amid Indecision
From a technical perspective, the recent price action, characterized by range-bound trading over the past month, suggests market indecision on the next direction. With mixed fundamentals at play, traders are advised to wait for a strong continuation of buying momentum before committing to a resumption of the AUD/JPY pair’s upward move from the September swing low.
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