AUD/JPY jumps to highest since March 22, Aussie 10-yr yield clocks 1-month high

AUD/JPY cross extended the four-day winning streak to 85.92 in Asia; the highest level since March 22 as the 10-year Aussie government bond yield rose to a one-month high of 2.5%. 

Rally in the iron ore prices and the broad based USD selling in the overnight trade pushed the AUD/USD pair higher. Meanwhile, the Japanese Yen underperformed as the upward pressure on the JGB yields means the Bank of Japan (BOJ) would buy more bonds to keep the 10-year yield around zero percent. 

The cross, thus remains well bid in Asia and was last seen trading around 85.90 levels. The Aussie-Japan 10-year spread has jumped from 229 basis points to 245 basis points over the last two days. That also explains the strength in the AUD/JPY pair. 

The uptick in the AUD/JPY usually means potential risk-on in the global equities. However, hawkish European central banks may play spoilsport and strengthen the demand for the Yen, thus capping the upside in the pair. 

AUD/JPY Technical Levels

A break above 86.00 (zero levels) would open up upside towards 86.30 (Feb 17 low) and 86.62 (61.8% Fib R of Feb high - Apr low). On the other hand, a breakdown of support at 85.74 (June 29 low) would open up downside towards 85.19 (5-DMA) and 84.83 (50% Fib R of Feb high - Apr low).