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  • AUD/JPY bulls battle September lows to extend recent pullback from fresh multi-day bottom.
  • Cautious optimism prevails ahead of the RBA’s anticipated monetary easing, likely blue wave in the US presidential elections.

AUD/JPY wobbles around 73.90/95 amid the early Tuesday morning in Asia. In doing so, the cross-currency pair fades the previous day’s strong recovery moves from 73.22. While the return of the risk-on could be cited as the key behind the previous pullback, cautious mood before the key RBA and US elections seem challenging the buyers off-late.

All eyes on RBA, for now…

With the October month activity data from China, the US and Europe renewing hopes of global recovery, the risk barometer AUD/JPY managed to post the biggest gain in one month the previous day. Also helping the pair could be the chatters surrounding no more emergency stimulus from Japan. Furthermore, recently increased odds of a soft Brexit added to the pair’s strength.

On the contrary, the coronavirus (COVID-19) woes in Europe seem to have gained a little attention as market sentiment improved despite a second national lockdown in the UK. Fears of a double-dip recession in England as well as no signs of the much-awaited US COVID-19 aid package offered additional challenges to the mood but were mostly shrugged off.

Against this backdrop, Wall Street managed to defy the previous week’s downbeat performance whereas the US 10-year Treasury yields fail to keep the upside momentum beyond 0.86%.

Looking forward, the RBA is widely anticipated to announce a rate cut to 0.10% from 0.25% with an additional asset purchase target of the Australian dollar 100 billion. That said, market players already know, and have mostly priced in, the forecasts since RBA Governor Philip Lowe spoke during the late-October. As a result, any surprises will be of interest to the AUD/JPY traders.

Read: RBA Preview: Rate cut and QE expansion to turbo-charge economic recovery

Following the RBA, US presidential election for 2020 will be the key event. While most forecasts favor a blue wave, Democratic Victory in both the US Houses, the recent polls suggest a tight race between US President Donald Trump and his rival Joe Biden. In any case, markets are going to be volatile.

Read: 2020 US Elections: Equities in three scenarios

Technical analysis

Failures to cross a three-week-old failing trend line, currently around 74.00, keeps AUD/JPY bears hopeful.