AUD/JPY seesaws around three-week high of 90.00 as RBA rate hike seems a close call

• AUD/JPY makes rounds to multi-day high after rising the most in seven weeks the previous day.
• Sluggish yields, light calendar amplify pre-RBA anxiety as traders remain divided over the Aussie central bank’s next move.
• RBA may offer 0.25% rate hike amid a close call.
• Focus on Rate Statement due to chatters of pause in rate hikes.

AUD/JPY grinds higher around the 90.00 round figure as it portrays the market’s anxiety ahead of the Reserve Bank of Australia’s (RBA) Interest Rate Decision on early Tuesday.

The cross-currency pair, also known as the risk-barometer, rallied the most in seven weeks the previous day as traders brace for the dovish RBA hike and ignored inflation fears emanating from the Organization of the Petroleum Exporting Countries (OPEC) and its allies led by Russia, known as OPEC+, move.

It’s worth noting that the downbeat yields and mixed data from China and Australia also failed to stop the AUD/JPY bulls the previous day amid cautious optimism in the market. On Monday, the US 10-year Treasury bond yields dropped in the last four consecutive days to 3.42% at the latest while the two-year counterpart marked a two-day downtrend in the last to 3.97%.

That said, Australia’s TD Securities Inflation eased to 0.3% MoM and 5.7% YoY for March versus 0.4% and 6.3% respective priors. Further, China’s Caixin Manufacturing PMI for March drops to 50.0 from 51.6 prior and 51.7 market forecasts.

On the other hand, Japan’s Tankan Large Manufacturing Index for the first quarter (Q1) of 2023, a closely observed output guide by the Bank of Japan (BoJ), eased to 1.0 from 7.0 previous readings and 3.0 expected. On the other hand, Japan’s Jibun Bank Manufacturing PMI for March improved to 49.2 from 48.6 previous. However, the below-50 figure suggests a contraction in private manufacturing activities.

Amid these plays, the S&P 500 Futures struggle for clear directions after Wall Street closed mixed.

Looking ahead, the AUD/JPY traders should carefully watch signals for the RBA’s next moves amid a close call of announcing 25 basis points (bps) of a rate hike. Even if the Aussie central bank announces the rate hike, the bears could sneak in if the RBA Statement utters a policy pivot.

Also read: Reserve Bank of Australia Preview: To pause or not to pause

Technical analysis

Although a one-week-old ascending support line, around 89.00, puts a floor under the AUD/JPY price, the buyers need to cross the 50-day Exponential Moving Average (EMA) hurdle of around 90.00 to keep the reins.