Sentiment was slightly positive Tuesday, as equities were trying to recover from the recent sell-off. That usually helps the AUD/JPY cross, and it was trading 0.3% higher ahead of the US session, seen at around 81.00.
RBA sounds somewhat dovish
The Reserve Bank of Australia left monetary policy unchanged earlier in the day, with the primary rate kept at 0.1% . However, the following statement sounded slightly more dovish than expected, undermining the Australian dollar.
The statement read that the central scenario for a rate rise will not be met before 2024. The central Bank remains committed to maintaining highly supportive monetary conditions.
Additionally, the Bank’s business liaison and data on job vacancies suggest that many firms seek to hire workers ahead of the expected reopening in October and November, implying the economy will grow again in the December quarter.
Overnight negative news for JPY
In Japan, the Tokyo CPI index rose to 0.3% year-on-year in September, up from -0.4% previously . However, the core inflation index stayed at -0.1%. From other news, Japan Finance Minister Shunichi Suzuki said on Tuesday that Prime Minister Fumio Kishida told him to stick to bold monetary easing and flexible fiscal spending, to put a decisive end to deflation. Furthermore, he hopes that BOJ will continue efforts to achieve a 2% inflation target .
It looks like the money printing and negative interest rates will never end in Japan.
Later in the day, the US services ISM is due and should decrease to 59.9 in September, from 61.7 in August. The employment index is expected to stay unchanged at 53.7, while the prices paid (or inflation subindex) will most likely rise to 79.7 from 75.4 previously, confirming that inflation is not transitory.
As that is one of the more important macro indicators, some volatility could hit the markets after the release.
AUDJPY defends 50-day average
The Aussie managed to defend the 50-day moving average, currently at 80.45 , which could be a strong bullish signal. It is now trying to break out from the recent triangle pattern, facing immediate resistance at 81.15, where the upper triangle line is located.
If successful, the Aussie could jump toward the current swing highs in the 82 region. However, it needs to close above 82 on a daily chart to change the medium-term trend back to bullish.
Alternatively, if sentiment worsens again, the support is at the mentioned 50-day average near 80.45, followed by another demand zone at the psychological level of 80.00.