AUD/JPY bounces off seven-week low as BoJ keeps monetary policy unchanged to bid adieu to Kuroda

• AUD/JPY marks 70-pip rebound from multi-day low on BoJ, picking up bids of late.
• BoJ defends current monetary policy status even as the dovish Governor departs after a decade.
• Governor Kuroda’s speech, risk catalysts eyed for fresh impulse.

AUD/JPY portrays a rollercoaster move as the Bank of Japan (BoJ) refrains from any major surprises even as Governor Haruhiko Kuroda braces for a goodbye during early Friday. That said, the cross-currency pair initially dropped to 89.26 and refreshed the seven-week low before rallying to the 90.00 threshold, around 89.90 by the press time.

BoJ keeps the short-term interest rate target at -0.1% while directing 10-year Japanese Government Bond (JGB) yields within the band of +/-0.50%. The BoJ Statement, however, mentioned that inflationary expectations are rising, which in turn raises doubts about the future of the Japanese central bank’s ultra-easy monetary policy.

Also read: BoJ: Inflation expectations heightening

Apart from the BoJ moves, a news piece from Bloomberg suggesting that China’s consumer spending is showing signs of a strong rebound joins the hopes of more stimulus from the dragon nation and the US readiness for more spending seems to also favor the AUD/JPY buyers.

Amid these plays, S&P 500 Futures dropped to a fresh low since January 10, down half a percent near 3,900, whereas the US 10-year and two-year Treasury bond yields fall for the second consecutive day to 3.83% and 4.76% in that order.

Elsewhere, the geopolitical fears surrounding China and the US, mainly due to Taiwan, as well as fears emanating from Russia, exert downside pressure on the AUD/JPY prices.

It should, however, be noted that the dovish rhetoric from Reserve Bank of Australia (RBA) Governor Philip Lowe, compared with likely challenges to the BoJ’s ultra-easy monetary policy and the market’s bets of an interest rate hike during late 2023, seems to also cap the AUD/JPY prices ahead of a volatile day.

Technical analysis

Failure to provide a decisive break of an upward-sloping support line from late January 2022, around 89.50 by the press time, keeps AUD/JPY buyers hopeful of poking the previous support line from early January 2023, close to 90.40 at the latest.