AUD/JPY rallies to four-year-highs at 87.58 as bull’s eye 88.00

• The Australian dollar extends its gains vs. the Japanese yen, up some 2.21%.
• An upbeat market mood keeps risk-sensitive currencies up while safe-haven peers fall.
• AUD/JPY Price Forecast: Upwards, though might be headed to a correction before resuming upwards.

The AUD/JPY risk barometer in the FX space rallies for the second straight day in the week and reached a four-year-high at 87.58 before retreating under 87.50 amid an upbeat market mood. At 87.49, the AUD/JPY reflects the abovementioned, after the US central bank paved the way for higher borrowing costs.

On Wednesday, the Federal Reserve hiked rates for the first time in three years, increasing the benchmark rate by 25 bps, and trimmed its economic growth projections for the remainder of the year, 2023 and 2024. Furthermore, policymakers expect inflation to peak around 4.1%, to decrease near the bank’s target at 2.3% by the end of 2024.

Equities reacted negatively, selling-off. However, it erased those losses and remained trading with gains, while in the FX space, the greenback was buoyant vs. safe-haven peers, while risk-sensitive currencies like the AUD and the NZD rose.

Australia’s strong jobs report boosts the AUD

Earlier In the Asian session, the Australian economic docket featured a strong jobs report for February. The economy added 77.4K jobs, smashing the 37K foreseen by analysts, while the unemployment rate fell to 4%.

Analysts at Rabo bank expressed that “the release of stronger than expected February Australian labour data would appear to tick another box on the country’s journey towards tighter monetary policy. At 4.0%, the February unemployment rate sank to a near 14 year low.”

On the Japanese front, on Thursday, the Bank of Japan would reveal its monetary policy decision, widely expected at -0.10%, and would keep supporting the Japanese economy.

Read more: BoJ Preview: Forecasts from seven major banks, a dovish hold

Worth noting that Citi said that “The focus will be on Governor Kuroda’s view about the recent depreciation of the yen, given media reports that the Kishida administration is increasingly concerned about yen weakness.”

AUD/JPY Price Forecast: Technical outlook

The AUD/[JPY is upward biased and with nothing on its way towards the 88.00 mark. However, due to the steepness of the rally, it could be subject to a mean reversion move or consolidation, as AUD bulls prepare an assault towards 88.00.

Upwards, the AUD/JPY first resistance would be the YTD high at 87.58. Breach of the latter would expose the 88.00 mark, followed by 89.00. On the flip side, in the event of a correction, the AUD/JPY first support would be 87.00, followed by October 21, 2021, high at 86.25, and then the 86.00 mark.