AUD/JPY prints three-day uptrend near 92.50 on firmer Aussie data, cautious optimism

• AUD/JPY hovers around intraday high as it extends week-start recovery.
• Market sentiment remains mildly positive amid expectations of no unexpected negatives from the Fed.
• Off in Japan, China restricts activity, Aussie Retail Sales rose past forecasts in March.
• Risk catalysts to keep the driver’s seat ahead of FOMC.

AUD/JPY remains on the front foot around 92.55, extending the two-day uptrend while poking a short-term key hurdle.

The risk barometer pair justifies recently positive Aussie data, as well as slightly positive market sentiment. However, holidays in Japan and a pre-Fed trading lull restrict the pair’s immediate moves.

That said, Australia’s Retail Sales for March rose past 0.6% market consensus to 1.6%, versus 1.8% prior. Earlier in the day, Australia’s S&P Global Services and Composite PMIs eased below the previous readouts of 56.2 and 56.6 to 55.9 and 56.1 in that order.

On the other hand, firmer S&P 500 Futures portray the market’s cautious optimism even as the Fed is anticipated to announce 50 basis points (bps) of a rate hike, as well as norms for balance sheet debt reduction. As the likely action is already priced in, as well as the Fed’s hesitance to stretch the boundaries considering the geopolitical and covid-led challenges to the economy, traders feel comfortable in placing small bids ahead of the key event.

Also supporting the AUD/JPY bulls is the Reserve Bank of Australia’s (RBA) hawkish bias and readiness for more such moves, considering inflation fears and economic resilience. The Aussie central bank superseded market expectations of a 0.15% rate hike with 25 basis points (bps) of a lift to the benchmark rate.

Alternatively, risk-negative headlines from China and Russia, mainly linked to the coronavirus resurgence and Ukraine invasion, join the fears that the Fed will need to tame the reflation woes to weigh on the AUD/JPY prices.

Looking forward, European traders’ actions ahead of the Fed and the US Treasury yields’ performance will direct intraday AUD/JPY moves ahead of the key Federal Open Market Committee (FOMC).

Read: Fed May Preview: 'Less hawkish' is the new dovish

Technical analysis

AUD/JPY pokes a two-week-old resistance line surrounding 92.55 while extending the previous week’s rebound. Also acting as an upside filter is the 21-DMA around 92.95. Meanwhile, pullback moves remain elusive until staying beyond the weekly support line, at 91.95 by the press time.