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• AUD/JPY snaps a three-day losing streak to over a two-week low touched on Monday.
• The risk-on environment undermines the safe-haven JPY and lends support to the cross.
• Intervention fears, along with China’s economic woes, might cap any meaningful gains. 

The AUD/JPY cross attracts some buyers during the Asian session on Tuesday and moves away from over a two-week low, around the 106.55 area touched the previous day. Spot prices climb back above the 107.00 mark in the last hour and for now, seem to have snapped a three-day losing streak amid the emergence of fresh selling around the Japanese Yen (JPY).

The prevalent risk-on environment – as depicted by an extension of a runaway rally across the global equity markets – is seen as a key factor undermining the JPY's relative safe-haven status. Apart from this, the JPY depreciating move lacks any obvious catalyst and is likely to remain cushioned in the wake of speculations that Japanese authorities might intervene in the markets to prop up the domestic currency. 

In fact, Japanese Chief Cabinet Secretary Yoshimasa Hayashi was out with some verbal intervention earlier this Tuesday and showed readiness to employ all available measures regarding forex. This comes on top of speculations that the Bank of Japan (BoJ) may raise interest rates in response to a weakening domestic currency should act as a tailwind for the JPY, warranting some caution for the AUD/JPY bulls.

Apart from this, concerns about a slowdown Chinese economy – the world's second-largest economy – seem to weigh on the China-proxy Australian Dollar (AUD) and might cap the AUD/JPY cross. The market worries resurfaced after the official data released on Monday showed that China's economy grew by 4.7% over the year during the second quarter of 2024 as compared to the 5.3% rise in the previous quarter. 

Hence, it will be prudent to wait for strong follow-through buying before confirming that the recent corrective slide from the highest level since May 1991, around the 109.35 region touched last Thursday, has run its course and positioning for any further appreciating move. Traders now look forward to the release of the monthly Australian employment details for some meaningful impetus on Thursday.

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