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  • AUD/JPY fades upside momentum following the key catalysts from Australia.
  • Aussie Retail Sales for December came in closer to initial forecasts, RBA sounds cautiously optimistic.
  • Earlier in the day RBA’s Lowe raised concerns over Australian growth and employment.
  • Risks dwindle amid the pre-NFP trading lull, light calendar elsewhere.

AUD/JPY justifies downbeat Australian Retail Sales and RBA Statement of Monetary Policy (SOMP) while declining to 80.20 during Friday’s Asian session. The shift in the market sentiment also directs the quote’s latest moves.

Australia’s Retail Sales for December came in -4.1% MoM versus -4.2% preliminary readings and +7.1% previous readings. Although the readings are downbeat, they are close to the initial forecasts and hence gain a little attention from the bears.

Also weighing on the AUD/JPY is the quarterly economic forecast by the Reserve Bank of Australia (RBA). In its SOMP, the RBA said, the Bank does not expect to hit its inflation & jobs goals until 2024 at the earliest.

Read: February Statement on Monetary Policy: Sees inflation staying too low even in most optimistic scenario 

Talking about the risks, the market’s previous optimism backed by the hopes of US stimulus and the coronavirus (COVID-19) vaccinations fade as traders turn cautious ahead of the US employment report for January. Even so, the upbeat performance of equities and Republicans’ readiness to talk on the much-awaited US relief package keeps the buyers hopeful.

Amid these plays, S&P 500 Futures struggle for a clear direction even as its benchmark on Wall Street closed at the record top by the end of Thursday.

Moving on, AUD/JPY traders will keep their eyes on the risk catalysts and may witness a dull trading session ahead of the US open, mainly due to the scheduled release of the American employment release.

Read: Nonfarm Payrolls Preview: Dollar needs a strong number to keep rallying

Technical analysis

Not only the 21-day SMA break but strong RSI conditions and an ascending trend line from January 28 also favor AUD/JPY unless it stays above 79.88.