AUD/JPY bulls gain ground as RBA and BOJ monetary policies diverge

• The AUD/JPY pair stands at 97.409, with an advance of 0.50% in the last session of the week.
• The main reasons for the upward movements are the divergence of the monetary policy of the RBA and the BOJ, which benefits the AUD,
• The daily chart indicators show strong buying momentum, while the four-hour indicators show overbought conditions.
• Despite the upcoming correction, the overall trend is bullish.

In Friday's session, it was observed AUD/JPY rise to 97.40, recording a gain of 0.50%. This behavior is mainly due to the opposing economic stances of the Reserve Bank of Australia (RBA) and the Bank of Japan (BOJ). With the daily chart indicating bullish momentum and the bulls asserting their dominance, the prevailing outlook appears positive. However, the four-hour chart shows that the indicators have entered the overbought zone, suggesting a possible imminent correction.

Along these lines, recent statements by Bullock, Governor of the RBA, suggest a balanced outlook with the possibility of future changes in interest rates. The possibility remains open for both an increase and stagnation, subject to inflation and economic growth. The market expects the RBA's first rate cut in August, with a total easing of 50 basis points planned for the year. In contrast, the Bank of Japan (BOJ) maintains a dovish stance, with Governor Ueda stating that accommodative financial conditions can continue after the current era of negative rates. According to the latest data, the probability of a BoJ rate hike is expected in June, with only 25 bps of tightening for the rest of 2024, and as long as markets are betting on a dovish BoJ, the pair could continue to rise.

AUD/JPY technical analysis

On the daily chart, the Relative Strength Index (RSI) is showing a positive trajectory within positive territory, suggesting that buyers remain in control, in line with the Moving Average Convergence Histogram (MACD), which is showing red bars. declining, suggesting that buyers are in control. From a broader perspective, the pair is trading above the 20-day, 100-day, and 200-day simple moving averages (SMA). This highlights that bullish forces maintain a firm grip on the larger time frames with bears nowhere to be found.

AUD/JPY daily chart

On the four-hour chart, momentum changes a bit. Key performance indicators have approached overbought levels, suggesting an imminent correction. The RSI confirms this forecast, as it enters overbought territory. The MACD also confirms this pattern, with its green bars gradually narrowing. In summary, although the bulls appear to be gaining ground currently, an imminent correction is looming as short-term momentum indicators line up to suggest a pullback.