AUD/JPY climbs to mid-92.00s, lacks bullish conviction amid mixed fundamental cues

• AUD/JPY gains some positive traction and moves away from a multi-week low set on Thursday.
• Hopes for the de-escalation of US-China tensions underpin the AUD and support spot prices.
• The divergent RBA-BoJ policy expectations warrant caution before positioning for further gains.

The AUD/JPY cross attracts some buying on Friday and for now, seems to have snapped a three-day losing streak to sub-92.00 levels, or a three-week low touched the previous day. The intraday move up lifts spot prices to a fresh daily high, around the 92.50 region during the early European session, and is sponsored by the emergence of some buying around the Australian Dollar (AUD).

US Deputy Secretary of State Christopher Landau spoke with Chinese Executive Vice Foreign Minister Ma Zhaoxu earlier today and discussed a wide range of issues of mutual interest. Both agreed on the importance of keeping open lines of communication, which, along with a broadly weaker, provides a modest lift to the AUD and the AUD/JPY cross. However, a combination of factors warrants some caution for bulls.

China's Commerce Ministry on Wednesday warned of legal action against individuals or organizations implementing US export restrictions on Huawei's Ascend AI chips. This highlights persistent tensions between the world's two largest economies and should keep a lid on the optimism. Apart from this, the Reserve Bank of Australia's (RBA) dovish outlook contributes to capping the AUD and the AUD/JPY cross.

The Australian central bank, as was widely expected, lowered its benchmark interest rate by 25 basis points (bps) to 3.8% on Tuesday and left the door open for more rate cuts. This marks a big divergence in comparison to hawkish Bank of Japan (BoJ) expectations, which, along with sustained safe-haven buying, is seen underpinning the Japanese Yen (JPY) and might hold back the AUD/JPY bulls from placing fresh bets.

BoJ officials recently showed a willingness to hike interest rates further if the economy and prices improve as projected. Adding to this, Japan's hotter consumer inflation figures released earlier today reaffirmed bets that the BoJ will continue raising interest rates. Hence, it will be prudent to wait for strong follow-through buying before confirming a near-term bottom for the AUD/JPY cross and positioning for further gains.