AUD/JPY stays firmer around 86.00 with eyes on RBA SoMP

• AUD/JPY grinds higher at two-week top, bracing for the first weekly gains in five.
• Market sentiment remains sour on hawkish central banks but JPY drops on firmer US Yields, virus woes in Japan.
• Aussie data came in mixed the previous day, Japan had light calendar.
• RBA SoMP will be eyed for rate hike concerns as RBA statement, Governor Lowe rejected the same despite strong inflation.

AUD/JPY bulls keep reins around a fortnight high past 82.00 as traders await RBA SoMP during early Friday morning in Asia.

The cross-currency pair cheered softer Japanese yen and comparatively better Aussie data, despite being mixed, to snap the four-week downtrend ahead of the key Aussie event.

US government bond yields rose the most in a week the previous day as the European Central Bank (ECB) and Bank of England (BOE) hawks raised inflation concerns. Among them, the BOE raised benchmark interest rates by 0.25% whereas the ECB refrained from rejecting sooner rate hikes and rather signaled a major policy change brewing, without giving many details though.

It’s worth noting, however, that the losses in equities and market’s cautious sentiment ahead of today’s US monthly jobs report, as well as the Reserve Bank of Australia’s (RBA) Statement of Monetary Policy (SoMP), challenges the AUD/JPY bulls of late.

Talking about data, Australia Trade Balance for December eased below 9423M to 8356M as Exports and Imports both decline to 1.0% and 5.0% versus 2.0% and 6.0% respective priors. However, Aussie Building Permits jumped to 8.2% MoM during the stated month against -1.0% market forecast and +3.6% previous readouts. Additionally, the National Australia Bank’s (NAB) Business Confidence also rallied to +18, beyond -10 market consensus and -1 prior.

RBA SoMP will convey the Aussie central bank’s economic forecasts and outlook on economic risks at 00:30 GMT. The statement will be closely examined amid the recently high inflation fears pushing the major economies towards the rate hike while the RBA rejects any such concerns. Should there be an upward revision in the inflation and GDP forecasts, coupled with the statements suggesting hawkish bias, AUD/JPY prices will further room for further upside. Though, odds of witnessing cautious remarks can’t be ruled out, which in turn may allow traders to consolidate recent gains.

Technical analysis

Although rebound from late December 2021 levels surrounding 80.40 keeps AUD/JPY buyers hopeful, a monthly resistance line precedes a convergence of the 100 and 200-DMAs, respectively near 82.30 and 82.50, to restrict the short-term upside of the pair.