AUD/JPY clocks fresh one-month ahead of the BOJ rate decision

The Asian desks continue to offer the Japanese Yen, pushing the AUD/JPY to a fresh one-month high of 84.35 levels ahead of the Bank of Japan (BOJ) rate decision.

BOJ to stand pat

The central bank is expected to keep the policy rates and QE program unchanged. Kuroda is likely to reiterate that the Bank of Japan will continue with its massive stimulus until inflation moves near the 2 percent target.

It is widely believed that the BOJ would continue to purchase what is needed to keep yields near zero. The bond purchases have dropped, but it is not a taper, Moreover, the purchases have dropped because the pressure on the Japanese yields from the rising Treasury yields has eased.

Markets do not expect the BOJ to talk about QE taper however, this has been a week of surprises - Fed retained interest rate outlook, unveiled the process of balance sheet unwinding and the be dissenters pushed the Gilt yield higher. More importantly, the BOJ balance sheet is as big as the economy.

Hence, the central bank may talk about an ‘exit strategy’, in which case the AUD/JPY cross may revisit 50-DMA support of 83.08.

AUD/JPY Technical Levels

A break above 84.52 (May 16 high) would expose 85.00 (zero figure) beyond which a major hurdle is seen at 85.77 (Mar 31 high). On the downside, failure to hold above 84.00 (session low + Apr 26 high) could yield a sell-off to 83.39 (June 9 high) and 83.08 (50-DMA).