• The AUD/JPY printed modest gains of 0.07% on Monday.
• A risk-on market mood favors the Australian dollar; a sudden shift might boost the JPY prospects.
• AUD/JPY Price Forecast: Remains upwards, though downside risks remains, on sentiment shifts.

The AUD/JPY remained confined to a narrow trading range within 91.50-92.14, ahead of the Reserve Bank of Australia’s monetary policy decision on Tuesday, which is expected to hike rates by 15 bps. At the time of writing, the AUD/JPY is trading at 91.74.

Risk appetite improved toward Wall Street’s close

The market sentiment fluctuated through the day, though it improved around Wall Street’s close. US equities recovered ground, while Asian stock futures point to a higher open. Around 04:30 GMT, the Reserve Bank of Australia (RBA) would deliver its interest rate decision as an Australian federal election looms.

Inflation in Australia reached a 20-year high, while Trimmed CPI rose by 3.7% y/y, just shy of the 4% threshold. Most analysts widely expect a 15 bps rate hike, though the board might delay the hike to June as it asses the next round of wages data for Q1. Furthermore, some analysts expect a 40 bps increase, with the likes of Natixis, ING, and even Citi.

Therefore, if the RBA raises rates, an AUD/JPY push upwards might be on the cards. Nonetheless, it’s worth noting that the AUD/JPY is the risk barometer of the FX, so any sentiment shifts could favor safe-haven peers, like the JPY and the CHF.

AUD/JPY Price Forecast: Technical outlook

The AUD/JPY remains upward biased. A false breakout below March’s 31 swing low at 90.76 on April 26, AUD bulls quickly reclaimed that level and lifted the AUD/JPY towards 93.50s. The MACD aims lower, towards zero, though the histogram shows that the distance between the MACD and the signal lines is contracting, opening the door for a bullish signal.

With that said, the AUD/JPY first resistance would be 92.00. Break above would expose May’s two daily highs at 92.15, followed by 93.00. On the flip side, the AUD/JPY first support would be the  91.00 mark. A breach of the latter would expose the April 27 daily low at 90.43, followed by 90.00.