• AUD/JPY fades bounce off intraday low after rising the most in a week the previous day.
• S&P 500 Futures print mild losses following Wall Street’s mixed closing.
• Upbeat US data, vaccine hopes backed risk-on mood but pre-RBA sentiment tests the bulls.

AUD/JPY cools down to 84.66 amid the initial Asian session on Tuesday. In doing so, the quote struggles for clear traction ahead of the key Australia trade numbers and the Reserve Bank of Australia (RBA) monetary policy meeting, not to forget mixed risk catalysts.

The quote began May on a strong footing amid upbeat market sentiment. Behind the moves were comments from the Federal Reserve (Fed) Chairman Jerome Powell and New York Fed President John Williams. Both the US bankers cited optimism for the latest recovery in economics.

Also on the risk-positive side was the US ISM Manufacturing PMI, despite easing from 65.00 forecast to 60.7. The reason could be spotted from the gauge’s industry components which rallied together for the first time since 2014.

Furthermore, chatters that some of the Indian regions are witnessing a slightly weaker covid growth and the US Food and Drug Administration’s (FDA) readiness to approve Pfizer-BioNTech vaccine for 12-15 year age-group also backed the risk-on mood.

It should, however, be noted that the upbeat prints of Australia’s weekly consumer sentiment gauge, 112.7 versus 112.4 prior, seem to have recently favored the AUD/JPY prices.

Meanwhile, worsening virus woes in Japan battle faster vaccine arrivals and the pre-Aussie data, RBA sentiment to weigh on the risk appetite.

Against this backdrop, S&P 500 Futures drop 0.14% after mixed closing of Wall Street and downbeat US Treasury yields.

Although the Aussie Trade Balance is likely to rise to 8000M versus 7529M prior to recent restrictions on the global movements of goods and people, due to the covid resurgence in Asia, may result in negative surprises. However, the expected inaction by the RBA and likely positive statements may keep the AUD/JPY on the front foot.

Technical analysis

Even as the 85.00 restricts short-term AUD/JPY upside, sellers are less likely to take risk of entries above the 50-day EMA level of 83.47.