AUD/JPY probes monthly lows As Risk-off Accelerates

AUD/JPY hit fresh monthly lows beneath the 91.00 level on Tuesday, the pair heavily weighed amid as a steep sell-off engulfed global equity markets with investors fretting about everything from China lockdown risk, economic and military tensions with Russia amid the ongoing Russo-Ukraine war, a worsening global growth outlook and the prospect of aggressive tightening from many of the world’s major central banks in the coming quarters.

The bounce in energy prices in the latter half of US trade amid fears that Russia is on the verge of cutting gas supplies to the EU has helped the commodity-sensitive recovery some poise in recent trade. As a result, AUD/JPY has been able to recover back to the north of the 91.00 level. But the pair is still trading nearly 5.0% lower versus last week’s highs close to the 96.00 mark.

AUD/JPY traders should also keep an eye on scheduled economic events this week, which include key Australian Q1 Consumer Price Inflation figures out on Wednesday ahead of the BoJ’s monetary policy announcement on Thursday. Should the Australian inflation data spur fresh RBA tightening bets, and the BoJ double down on its dovish policy stance of negative interest rates and yield curve control (as expected), that could provide AUD/JPY with some bullish impetus.

If risk appetite remains unsatisfactory and global yields remain on the back foot as a result, the prospect for a continued recovery in the yen, which had up until the last few days suffered a beating in April, may continue. AUD/JPY bears will be looking for a break below support in the form of the late March lows at 90.75, which could open the door to a test of support from 2015 and 2017 in the respective 90.70s and 90.30s areas.