AUD/JPY marches beyond 93.00 with eyes on full markets, RBA

• AUD/JPY holds onto the week-start rebound from a five-week low.
• Off in the US allowed bears to take a breather even if the sentiment remains sluggish.
• Downbeat yields, fears of economic recession could favor sellers but RBA’s likely 05 bps rate hike appears positive catalyst.
• China Caixin Services PMI, risk factors will be important too.

AUD/JPY takes the bids to refresh intraday high around 93.20 as traders await the key Reserve Bank of Australia (RBA) Interest Rate Decision during early Tuesday in Asia.

The cross-currency pair rose the most in two weeks the previous day, also bounced off the lowest levels since late May, amid the market’s consolidation in the absence of the US traders. Also likely to have favored the pair buyers were mildly positive prints of the second-tier Aussie data.

That said, Australia’s Building Permits for May marked a surprise jump to 9.0% MoM versus -1.8% expected and -3.9% prior while Home Loans also improved to 2.1% from -7.3% previous readout and -2.0% market consensus.

It’s worth noting that the chatters surrounding the US discussion on removing the Trump-era tariffs on China also underpinned the AUD/JPY rebound considering the strong trader ties between Canberra and Beijing.

On the contrary, fears of the economic recession continue to weigh on the AUD/JPY prices even if the absence of US bond traders restricted the pair’s momentum.

While the US markets were off, German bund yields began the week on a positive note and favored AUD/JPY run-up. That said, the yields on the 10-year German Bund rose over 10 basis points to 1.32% at the latest.

Looking forward, the pair traders will pay attention to China’s Caixin Services PMI for June, expected 47.3 versus 41.4 prior, as well as risk catalysts, for intermediate directions ahead of the RBA.

The Aussie central bank is up for announcing the third rate hike, expected worth 0.50%, as it struggles to tame inflation fears at home. However, the latest challenges to global economic growth could probe the RBA hawks and hence highlight the importance of today’s RBA Rate Statement.

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Technical analysis

AUD/JPY bulls need to cross the monthly resistance, around 93.85 by the press time, to convince buyers. Otherwise, a pullback towards an upward sloping support line from late January, close to 91.65 at the latest, can’t be ruled out.