AUD/JPY is in a recovery mode ahead of RBA decision

AUD/JPY is on the rise this Tuesday morning as investors expected the Reserve Bank of Australia (RBA) to hold benchmark lending rate unchanged at 1.50%.

The cross dropped to a low of 86.16 on Monday and recovered to 86.50 levels this Tuesday morning

RBA eyed

The strength in the Q4 GDP and the record trade balances led to a rise in the RBA rate hike bets. There is a 20 % chance that the bank may hike rates this year.

However, economists point to soft underbelly - weak consumer spending, real disposable income. That should keep the RBA away from the rate hikes this year. On the other hand, concerns of housing bubble leaves little room for further monetary easing.

AUD/JPY Technical Levels

A break above 86.66 (5-DMA) would open doors for 87.08 (Feb 24 high) and 87.39 (Feb 22 high). On the downside, support is seen at 86.16 (previous day’s low), which, if breached could yield 85.85 (Feb 28 low), under which losses could be extended to 85.24 (Feb 7 low).