AUD/JPY resists extending gains towards 94.00, focus on RBA Minutes, Tokyo’s meddling

• AUD/JPY grinds higher around eight-day top as bulls await more clues.
• Risk-on mood, firmer yields and no sign of Japan intervention keep buyers hopeful.
• Fears of Tokyo’s meddling, wait for clues of the RBA’s surprise 0.25% rate hike probe further upside.
• Bulls to have a bumpy road ahead, bears will have a tough time returning unless any surprises erupt from Japan, Australia.

AUD/JPY struggles to portray the risk-on mood around a two-week high near 93.85 during Tuesday’s Asian session, after witnessing a strong positive start due to the firmer sentiment. The reason could be linked to the cautious sentiment ahead of the Reserve Bank of Australia’s (RBA) Meeting Minutes.

In addition to the pre-event anxiety, mainly due to the RBA’s surprise 0.25% rate hike, the absence of major data/events and expectations of Japan’s intervention also seems to challenge the AUD/JPY prices. Also, hawkish Fed bets and updates from China’s annual Communist Party Congress meeting add filters for the pair’s upside.

That said, the cross-currency pair rose the most in a fortnight the previous day after the global markets welcomed the UK’s U-turn from a “mini-budget” proposals that were perceived as detrimental to the British economy. Also favoring the risk-on mood could be the hopes of more stimulus from China, Europe and Japan to defend the respective economies from slipping into the recession.

It’s worth noting that China President Xi Jinping’s comments suggested a firm determination to zero-covid policy and sounded challenging for geopolitical concerns. However, statements from China’s Premier Li seemed to have favored the sentiment of late. China’s Li stated that the economy continues its upward trend. “China will keep economic operations within a reasonable range," Li added.

Elsewhere, hawkish Fed bets also challenge the AUD/JPY pair buyers. As per the latest readings of the CME’s FedWatch Tool, there is nearly 95% chance of a 75 bps Fed rate hike in November.

While portraying the mood, the US Dollar Index (DXY) dropped 1.09% while Wall Street also reversed Friday’s losses the previous day amid firmer sentiment. Additionally, the US Treasury yields marked mild gains after witnessing a downbeat start whereas the S&P 500 Futures add nearly 0.80% intraday by the press time.

Looking forward, it all depends upon the RBA Minutes as bears seek clues supporting the latest price-negative surprise, which in turn could help AUD/JPY to pare the latest gains. Also likely to challenge the pair buyers are the increasing odds of Japan’s market intervention to defend the yen as it drops to the lowest levels in 32 years versus the US dollar. Recently, Japanese Finance Minister Shunichi Suzuki said that they are keeping a close eye on the fx market with a sense of urgency.

Technical analysis

A clear upside break of the monthly resistance line, now support around 92.60, directs AUD/JPY bulls towards the 100-DMA hurdle surrounding 94.25.