AUD/JPY reverses from seven-year high towards 91.00 as yen rises on sluggish yields, BOJ woes

• AUD/JPY remains on the back foot while snapping eight-day uptrend near the highest levels since August 2015.
• Fears of BOJ intervention, steady US T-bond yields trigger yen’s rebound.
• Ukraine-Russia woes, covid resurgence also challenge the buyers.

AUD/JPY prints the first daily loss in nine as market sentiment sours during Friday’s Asian session. That said, the quote drops 0.58% intraday around 91.40 ahead of the European session.

The risk barometer pair’s latest weakness could be linked to the broad recovery in the Japanese yen, as well as the market’s fears due to the Ukraine crisis.

Upbeat prints of Japan’s inflation data fuelled yields on the Japanese Government Bonds (JGBs) and triggered the market’s fears that the Bank of Japan (BOJ) will intervene soon, which in turn weighed on the Japanese equities and the national currency yen. “The yield on the 10-year Japanese government bond (JGB) rose to 0.235% on Friday, exceeding the level at which the Bank of Japan offered to buy an unlimited amount of JGBs at 0.25% on Feb. 10,” said Reuters.

Elsewhere, market conditions remain choppy as traders await more clues on the Ukraine-Russia stand-off. The Western push to take collective measures to stop the Russian invasion of Ukraine weighs on the market sentiment and underpins the JPY’s safe-haven demand. However, the divide among the Eurozone members restricts the likely risk-off mood. On the same line are hopes that the latest compulsion on Russia may result in positive progress in the peace talks.

Also challenging the AUD/JPY buyers are the coronavirus fears and Japan’s upbeat Tokyo inflation data.

It should be noted, however, that firmer prices of iron ore, Australia’s key export keeps AUD/JPY buyers hopeful.

Technical analysis

AUD/JPY pullback remains elusive unless breaking the 90.00 psychological magnet. That said, overbought RSI conditions hint at a pullback towards 2017 peak surrounding 90.35.