The pair tends to act as a key risk barometer in the market and this time is not much different. As the aussie looks to secure a breakout to the upside against the dollar, AUD/JPY is also pushing higher but not really breaking out in quite similar fashion.
The pair is up 0.7% to around 76.70 levels now but is nearing familiar resistance around the 76.75 to 77.00 region. That helped to stall gains at the start of the month and will be the key spot to watch to confirm any major shift in the risk bias.
Equities look poised for another solid day of gains so far in European trading, but major currencies look like they may need a further push to solidify any notion that we are going to switch towards a risk-on wave after the push and pull since last week.
Despite modest gains yesterday, the S&P 500 still closed below 3,588 and the 3,600 level. However, US futures are pointing towards a 25 points gain to test the latter and that will be a key technical level to watch ahead of the close in the next few days.
For risk buyers, keeping above that will be crucial to allow for the more upbeat sentiment to translate elsewhere and in particular, perhaps help to drive AUD/JPY beyond resistance at 76.75-00 as highlighted above.
As such, risk buyers are in a good spot to do so but more work needs to be done as we approach yet another run at the key technical levels above.