AUD/JPY bulls struggle to capitalize on move beyond 98.00, await BoJ and RBA on Tuesday

• AUD/JPY climbs to over one-week top on Monday, though the upside remains capped.
• The BoJ policy uncertainty keeps the JPY bulls on the defensive and lends some support.
• Traders seem reluctant to place aggressive bets ahead of the BoJ and RBA on Tuesday.

The AUD/JPY cross attracts some buyers for the second successive day on Monday, albeit struggles to capitalize on the modest intraday uptick beyond the 98.00 round-figure mark. Traders opt to wait on the sidelines ahead of the key central bank event risks on Tuesday, warranting some caution before positioning for an extension of last week's bounce from sub-97.00 levels, or over a one-month low.

The Bank of Japan (BoJ) and the Reserve Bank of Australia (RBA) are scheduled to announce their policy decisions on Tuesday, which will play a key role in providing a fresh directional impetus to the AUD/JPY cross. In the meantime, BoJ Governor Kazuo Ueda's slightly bleaker assessment of the economy last week is seen undermining the Japanese Yen (JPY) and acting as a tailwind for spot prices.

In fact, Ueda, speaking in parliament last Tuesday, noted that the economy is showing some signs of weakness, pointing to the recent batch of soft data on consumption. This might have smashed hopes for an imminent shift in the BoJ's policy stance in March, which, along with stability in the equity markets, seem to weigh on the safe-haven JPY and lend some support to the AUD/JPY cross.

The Australian Dollar (AUD), on the other hand, remains supported by signs of improving relations between Australia and China – the former's biggest trading partner. Adding to this, the upbeat Chinese macro data, showing that Retail Sales and Industrial Production rose more than expected in February, turns out to be another factor that benefits antipodean currencies, including the Aussie.

Meanwhile, the positive outcome from the spring wage negotiations seems to have paved the way for the BoJ to exit its negative interest rate policy sooner rather than later. This holds back the JPY bears from placing aggressive bets and keeps a lid on any further gains for the AUD/JPY cross. Hence, it will be prudent to wait for strong follow-through buying before confirming that spot prices have bottomed out.