AUD/JPY holds ground after RBA’s decision

• The AUD/JPY is positioned at 96.40 with mild gains.
• The RBA held rates steady as expected.
• On the daily chart, the positive slope of the RSI alongside the MACD's decreasing red bars hint at a reduced selling momentum.
• A bullish SMA crossover at the 96.7 level looming with the 20 and 100-day SMAs, hinting at a potential market shift.

In Tuesday's session, the AUD/JPY pair traded mildly higher, hitting a daily high at 96.83 and then stabilizing at 96.40. The latest market movements has been influenced by the diverging monetary policies of the Reserve Bank of Australia (RBA) and Bank of Japan (BoJ) while the Australian’s bank hint of not ruling out further hikes may strengthen the pair. On the technical side, the daily chart suggest that the bulls are holding ground, while the hourly indicators turned flat.

The AUD/JPY pair trades in a complex environment influenced by the monetary policies of the Reserve Bank of Australia (RBA) and the Bank of Japan (BOJ). The RBA recently opted on Tuesday for a hawkish hold, not ruling out further interest rate increases in response to high inflation, while simultaneously reducing growth projections due to a weaker near-term outlook for consumer spending. Meanwhile, Japan reports soft earnings and household spending data, suggesting a continuation of lenient policy settings from the BOJ. A clear divergence in economic conditions and policy directions may fuel further upside for the cross and drive demand to the Aussie. Regarding expectations, the market expects a 50 bp rate cut from the RBA this year, while the BoJ is anticipated to remain on hold.

AUD/JPY levels to watch

On the daily chart, the indicators are displaying a mixed outlook. While the Relative Strength Index (RSI) exhibits an upward trend, it remains in a bearish realm, hinting at potential but not realized bullish activity. The Moving Average Convergence Divergence (MACD) further augments the cautious tone with diminishing red histograms. That said, the position of the cross relative to its Simple Moving Averages (SMAs) offers a ray of optimism. Despite the short-term neutral outlook, a larger view reveals that the pair is abiding above the key 20, 100, and 200-day SMAs. This suggests an overall bull dominancy, with potential room for them to recover lost ground. In addition, traders should eye a potential crossover between the 100 and 20-day SMAs which may fuel further upside.

Shifting focus to the hourly chart horizon, the stage seems more balanced between bulls and bears. Indicators appear to have flattened in a bearish territory, mirroring a stalemate between buyers and sellers. For the rest of the session and heading into Wednesday, the cross may continue to side-ways trade.

AUD/JPY daily chart