AUD/JPY remains strong above 91.00 amid downbeat yields, risk-on mood

• AUD/JPY grinds higher around two-week top, sidelined after rising the most in two months.
• Risk appetite remains firmer amid hopes of further improvement in consumption, BOJ’s firm support for easy money.
• RBA vs. BOJ battle keeps buyers hopeful, qualitative catalysts are important for fresh impetus.

AUD/JPY extends the previous two-week upside to 91.10, refreshing a two-week high, as traders seek fresh clues during Monday’s initial Asian session. That said, the market’s risk-on mood joined the Bank of Japan’s (BOJ) firmer support for the easy money policies previously favored the pair buyers.

On Friday, risk appetite improved after the US inflation data matched easy expectations but the consumption improved in April. That said, the US Personal Consumption Expenditure (PCE) data came in mixed for April, mostly downbeat, as the Core PCE Price Index, the Fed’s preferred measure of inflation, matched 4.9% YoY forecasts versus 5.2% prior. Further, Personal Income rose less than expected but the Personal Spending improved.

Also likely to have favored the optimist was a headline suggesting a reduction in China’s covid hardships, as well as the dragon nation’s readiness for more stimulus.

It’s worth noting that the Reserve Bank of Australia’s (RBA) recently hawkish tone, backed by upbeat Aussie data, contrasts with the BOJ policymakers’ readiness to keep the easy money flowing despite the inflation fears also underpin the AUD/JPY prices. “BOJ will continue to work closely with government, strive to achieve 2%  inflation target,” said Bank of Japan Governor Haruhiko Kuroda on Friday.

Against this backdrop, the Wall Street benchmarks posted another positive day but there was no major change in the US 10-year Treasury yields. That said, the S&P 500 Futures print 0.20% intraday gains at the latest.

Moving on, a lack of major data/events could restrict market moves, as well as challenge AUD/JPY traders, but risk catalysts will be important to watch for clear directions.

Technical analysis

AUD/JPY bulls need to cross a five-week-old descending trend line, around 91.35 by the press time, to keep the reins.