AUD/JPY climbs for second day, breaks key resistance amid risk-on mood

• AUD/JPY climbs for a second day, up 2.5% this week, boosted by US-China tariff truce and broad risk-on flows.
  
• Aussie supported by improving domestic sentiment; focus shifts to Australia’s wage data due Wednesday.
  
• Price breaks above multi-month resistance at 95.00, RSI approaches overbought territory.

AUD/JPY extended its upward momentum on Tuesday, rising to 96.60 at the time of writing, as renewed risk appetite and stronger Australian data continue to fuel gains in the pair. The cross has gained nearly 2.5% this week, driven by global optimism following the US-China agreement to temporarily roll back tariffs, alongside a softer US Consumer Price Index (CPI) print that has improved risk conditions for higher-yielding currencies.

The Australian Dollar (AUD) is riding the wave of trade-related optimism, especially given the country’s close economic ties to China. Domestically, sentiment also improved with the Westpac-Melbourne Institute Consumer Sentiment Index rising by 2.2% MoM to 92.1 in May, recovering from a 6% drop in April and marking the third monthly increase this year. 

Meanwhile, the NAB Business Confidence Index rose to -1% in April from -3% in March, signaling a slight pickup in corporate sentiment despite remaining in negative territory. Attention now turns to Wednesday’s Wage Price Index (WPI), which could influence expectations around the Reserve Bank of Australia’s (RBA) next policy move.

Meanwhile, the Bank of Japan (BoJ) maintains a cautiously hawkish tone despite mounting concerns over global trade uncertainty. Speaking before parliament on Tuesday, Deputy Governor Shinichi Uchida reiterated that the central bank expects both wages and prices to continue rising, reinforcing the BoJ’s view that inflationary momentum remains intact. While Uchida acknowledged that US tariffs may weigh on near-term growth, he emphasized that the BoJ would proceed with rate hikes if the economy and price outlook evolve as anticipated.

This stance is consistent with the BoJ’s April 30–May 1 policy meeting summary, which described tariff effects as short-lived shocks with minimal long-term impact on inflation or potential growth. Policymakers also stressed the importance of maintaining flexibility and closely monitoring global risks and uncertainties.

Technical analysis: AUD/JPY breaks above 95.00 resistance, targets 97.00 as bullish momentum accelerates

AUD/JPY has broken above a multi-month resistance zone at 95.00, confirming a bullish breakout as the pair trades near the 200-day Exponential Moving Average (EMA) at 95.93. A decisive daily close above this dynamic resistance could pave the way for a test of the 97.00 psychological level, followed by 98.50, a key resistance zone last visited in January.

On the downside, immediate support lies at 93.50, with stronger technical backing near the 50-day EMA at 92.90. The Relative Strength Index (RSI) on the daily chart is currently at 66, approaching overbought territory, suggesting momentum remains strong but may be due for a consolidation if upside levels are not cleared soon.