AUD/JPY struggles at 88.50 ahead of RBA’s Lowe speech

• The Australian dollar finished its four-day rally vs. the JPY.
• US equity indices finished with losses on a risk-aversion session.
• AUD/JPY Price Forecast: Upwards, but might consolidate ahead RBA’s Lowe.

The AUD/JPY rally lasted for four days as the cross-currency pair slid 0.10% on Monday, caused by a dampened market mood as hostilities between Russia and Ukraine persisted. As the Asian Pacific session begins, the AUD/JPY is trading at 88.35.

On Monday, US equity indices trading day ended in the red, reflecting risk-aversion in the financial markets. Meanwhile, in the FX space, the only gainer was the Canadian dollar, with the JPY being the laggard, followed closely by the EUR.

In the case of the Australian dollar, an absent economic docket left the pair adrift to pure market sentiment. With that said, the AUD/JPY overnight was subdued in a narrow 40-pip range, something worth noting due to the “normal” Average Daily Range (ADR) of 95-pips.

Late in the Asian session, at 01:00 GMT, the Reserve Bank of Australia (RBA) Governor Philip Lowe will talk at the Walkley Journalism awards. AUD/JPY traders need to be aware of it, as money market futures show that the investors expect RBA’s rates to finish around 1.46% by the end of 2022.

Due to the central bank policy divergence, the Bank of Japan’s (BoJ) staying dovish, while the RBA’s tilted neutral-hawkish, would favor the Australian dollar. That said, any Lowe’s “hawkish” comments could lift the AUD/JPY higher.

AUD/JPY Price Forecast: Technical outlook

The AUD/JPY is upward biased, as depicted by the daily chart. Nevertheless, Monday’s price action formed a dragonfly-doji right around the highs, so the pair might correct before resuming upwards, but the news could spur another leg-up as traders wait for RBA’s Lowe.

Upwards, the AUD/JPY first resistance would be 88.50. A decisive break upwards would expose the first resistance level, the R1 daily pivot point at 88.65. Once cleared, it would expose the R2 daily pivot at 88.90, followed by the 89.00 mark.

On the flip side, the AUD/JPY first support would be the daily pivot at 88.24. Breach of the latter would expose the S1 daily pivot at 87.98, followed by Monday’s low 87.88.