AUD/JPY probes monthly lows, pivots 91.00 level as risk-off market mood weighs

• AUD/JPY hit fresh monthly lows beneath the 91.00 level on Tuesday, the pair heavily weighed amid risk-off flows.
• An energy price bounce has helped AUD/JPY recover above 91.00, though it still trades 5.0% lower versus last week’s highs.
• Risk appetite will remain the key driver, though Aussie CPI and the BoJ’s policy announcement will be worth watching.

AUD/JPY hit fresh monthly lows beneath the 91.00 level on Tuesday, the pair heavily weighed amid as a steep sell-off engulfed global equity markets with investors fretting about everything from China lockdown risk, economic and military tensions with Russia amid the ongoing Russo-Ukraine war, a worsening global growth outlook and the prospect of aggressive tightening from many of the world’s major central banks in the coming quarters.

A bounce in energy prices in the latter half of US trade amid fears that Russia is on the verge of cutting gas supplies to the EU has helped the commodity-sensitive recovery some poise in recent trade. As a result, AUD/JPY has been able to recover back to the north of the 91.00 level. But the pair is still trading nearly 5.0% lower versus last week’s highs close to the 96.00 mark.

If risk appetite remains ropey and global yields remain on the back foot as a result, the prospect for a continued recovery in the yen, which had up until the last few days suffered a beating in April, may continue. AUD/JPY bears will be looking for a break below support in the form of the late March lows at 90.75, which could open the door to a test of support from 2015 and 2017 in the respective 90.70s and 90.30s areas.

AUD/JPY traders should also keep an eye on scheduled economic events this week, which include key Australian Q1 Consumer Price Inflation figures out on Wednesday ahead of the BoJ’s monetary policy announcement on Thursday. Should the Australian inflation data spur fresh RBA tightening bets, and the BoJ double down on its dovish policy stance of negative interest rates and yield curve control (as expected), that could provide AUD/JPY with some bullish impetus.