AUD/JPY jumps to 3-1/2 month high, will the RBA turn hawkish?

Sharp decline in the Japanese Yen pushed the AUD/JPY cross to a 3-1/2 month high of 86.95 levels ahead of the all important RBA rate decision at 04:30 GMT.

Will the RBA turn hawkish?

The European Central Bank (ECB), Bank of England (BoE) and Bank of Canada (BOC) have all been making hawkish statements in recent weeks, seemingly preparing markets for an eventual unwinding of the unprecedented stimulus.

Investors are wondering whether the RBA will join the party. Most economists believe the central bank is likely to retain its neutral stance as the AUD is already strong and inflation is below its 10-year average. The labour market continues to strengthen, but there are no signs of wage price inflation.

No change in the narrative might disappoint AUD bulls who are betting on a hawkish stance, thus leading to a pullback in the AUD/JPY cross. The demand for the AUD would spike if the central bank tilts to the hawkish side.

AUD/JPY Technical Levels

The cross was last seen trading around 86.88. A break above 87.03 (100% Fib ext. of June low -June 20 high - June 22 low) would open up upside towards 87.49 (Mar 15 high) and 87.53 (Dec 15 high). On the downside, breach of support at 86.54 (June 29 high) would expose 86.00 (zero levels) and 85.85 (Friday’s low).