AUD/JPY tumbles below 92.00 on escalating lockdown fears in China

• AUD/JPY has surrendered the crucial support of 92.00 as lockdown fears in China escalate.
• Western central banks are set for another leg of raising interest rates this month.
• In today’s session, Aussie Trade Balance data will be of utmost importance.

The AUD/JPY pair has witnessed a steep fall while attempting to recapture Wednesday’s high at 92.50. The risk barometer has faced significant offers in the opening session of Tokyo and downside potential remains favored amid the souring market mood.

Recession fears are escalating further as Western central banks have moved to another leg of raising interest rates at a bumper rate. In relation to that, the Reserve Bank of Australia (RBA) has already announced a consecutive rate hike by 50 basis points (bps) on Tuesday.

RBA Governor Philip Lowe has elevated its Official Cash Rate (OCR) to 1.35% and the guidance is still hawkish. The increments in policy tightening measures by the RBA dictate that the central bank is focused on bringing price stability sooner.

Meanwhile, the resurgence of Covid-19 in China has spooked the market sentiment. A back-to-back resurgence of the coronavirus in China is hurting their economic activities and eventually the operations with their trading partners. It is worth noting that Australia is a leading exporter to China and a halt in Chinese economic activities also affects the antipodean.

Going forward, the release of the Aussie Trade Balance data will be of significant importance. As per the market consensus, the economic data is seen at 10,725M, higher than the prior print of 10,495M.

On the Tokyo front, yen bulls have strengthened on rising expectations for higher price pressures. Seisaku Kameda, a former chief economist at the Bank of Japan (BOJ) on Tuesday said that the sharp decline in the yen on a broader note will lift the inflation outlook. The inflation rate may remain well above 2% this year.