AUD/JPY sticks to intraday gains above mid-96.00s amid positive risk tone

• AUD/JPY prolongs its uptrend for the seventh straight day, though the upside seems limited.
• The upbeat market mood undermines the JPY's relative safe-haven status against the Aussie.
• The divergent RBA-BoJ policy expectations warrant caution before positioning for further gains.

The AUD/JPY cross turns positive for the seventh straight day following an intraday dip to the 96.25 region on Wednesday and moves back closer to a one-week high touched the previous day. Spot prices climb to the 96.75 area during the first half of the European session, though the upside remains capped amid the divergent Reserve Bank of Australia (RBA)-Bank of Japan (BoJ) policy outlook.

The RBA slashed its outlook for economic growth in 2025 to 1.7% from 2.1% after lowering its cash rate for the third time in 2025, to the lowest since April 2023, on Tuesday, and said that cooling inflation will likely spur more rate cuts. Adding to this, RBA Governor Michele Bullock did not rule out back-to-back rate cuts. In contrast, the BoJ revised its inflation forecast at the end of the July meeting and reiterated that it will raise interest rates further if growth and inflation continue to advance in line with its estimates. This, in turn, could act as a tailwind for the AUD/JPY cross.

Meanwhile, data released this Wednesday showed that Japan's Corporate Goods Price Index (CGPI) climbed 2.6% in July from a year earlier, down from the previous month's 2.9%. This comes on top of a fall in Japan's real wages for the sixth straight month in June and fuels concern about a consumption-led recovery. Furthermore, the ruling Liberal Democratic Party's loss in the upper house election on July 20 adds a layer of uncertainty amid concerns about the negative economic impact of higher US tariffs and suggests that the prospects for further BoJ policy normalization could be delayed.

This, along with the upbeat market mood, bolstered by an extension of the US-China trade truce and the US-Russia summit aimed at ending the war in Ukraine, might cap gains for the safe-haven JPY and benefit the risk-sensitive Aussie. Nevertheless, the aforementioned fundamental backdrop warrants some caution before placing fresh bullish bets around the AUD/JPY cross. The market attention now shifts to monthly employment details from Australia, due for release during the Asian session on Thursday, which should provide some meaningful impetus to the currency pair.