AUD/JPY stays above 81.00 amid firmer sentiment ahead of RBA

• AUD/JPY consolidates the heaviest daily in rise, battles 13-day-old resistance line.
• Risk appetite improves at the week’s start without major positives.
• Aussie data came in positive, China PMIs signaled downbeat start of 2022 ahead of Lunar New Year holidays.
• Hawkish expectations from RBA tests bulls ahead of the event, Japan’s Omicron updates, jobs report important as well.

AUD/JPY struggles to extend the heaviest daily jump in over a month by grinding around 81.30-40 amid the pre-RBA caution on early Tuesday.

The risk barometer pair rose the most since January 13 before a fortnight-old resistance line challenged the bulls ahead of the key monetary policy meeting of the Reserve Bank of Australia (RBA). Additionally, the softer-than-forecast Commonwealth Bank of Australia Manufacturing PMI for January, 55.1 versus 55.3, also probes the AUD/JPY buyers of late.

AUD/JPY began the week on a positive note, tracking the general market mood, as traders licked the Fed-led moves amid a light calendar. Also favored the riskier assets were Japanese PM Fumio Kishida’s rejection to call another virus-led state of emergency and softer prints of Japan’s Retail Trade, as well as Industrial Production, figures for January.

It’s worth observing that China’s official activity numbers for January came in softer while the Caixin Manufacturing PMI marked a contraction in activities with 49.1 figures.

On a broader front, the US 10-year Treasury yields hovered around 1.78% but a positive performance of the Wall Street benchmarks favored the AUD/JPY to print daily gains.

Looking forward, pre-RBA caution may keep the AUD/JPY prices below the aforementioned short-term resistance. However, hawkish expectations from the Aussie central bank can become a reason for the currency pair to remain weak afterward.

Market consensus favors a formation end to the A$350 billion bond-buying program and signals hints for the rate hikes. “We expect the RBA to forecast trimmed mean inflation of 3% by mid-2022, with unemployment falling below 4% by the end of the year. Despite this we expect the RBA Board to say it will wait until wages growth accelerates further before it lifts the cash rate,” said ANZ.

Ahead of the RBA, Australia Retail Sales for January and Japan’s job numbers will entertain the AUD/JPY traders. However, nothing matters more than the Aussie monetary policymakers’ verdict.

Read: Reserve Bank of Australia Preview: A hawkish surprise from Lowe & Co?

Technical analysis

A downward sloping trend line from January 13 restricts immediate AUD/JPY upside around 81.45, a break of which will direct the pair towards the 200-DMA hurdle of 82.51. Meanwhile, 23.6% Fibonacci retracement (Fibo.) of October-December 2021 downside, near 80.55, precedes the 80.00 threshold to keep AUD/JPY buyers hopeful.