• AUD/JPY scales higher for the third straight day amid optimism over a US-China trade deal.
• Receding safe-haven demand undermines the JPY and lends additional support to the cross.
• The divergent BoJ-RBA policy expectations warrant caution for aggressive bullish traders.

The AUD/JPY cross attracts some follow-through buyers for the third successive day and touches over a three-week top, around the 92.00 mark during the Asian session on Friday. Moreover, the supportive fundamental backdrop suggests that the path of least resistance for spot prices remains to the upside.

Signs of easing US-China tensions continue to fuel hopes for the potential de-escalation of a trade war between the world’s two largest economies and remain supportive of a positive risk tone. In fact, US President Donald Trump said on Thursday that trade talks between the US and China are underway. Adding to this, China is reportedly mulling to suspend its 125% tariff on some US imports.

The developments undermine the safe-haven  Japanese Yen (JPY) and benefit antipodean currencies, including the Aussie, which, in turn, is seen acting as a tailwind for the AUD/JPY cross. However, China’s Foreign Ministry spokesperson Guo Jiakun told reporters on Thursday that China and the US have not conducted consultations or negotiations on tariffs. This might cap the market optimism.

Meanwhile, data released earlier this Friday showed that consumer inflation in Tokyo accelerated in April and lifted bets for more interest rate hikes by the Bank of Japan (BoJ) in 2025. In contrast, the markets are pricing in the possibility that the Reserve Bank of Australia (RBA) will lower rates by 25 basis points (bps) in May. This might hold back bulls from placing aggressive bets around the AUD/JPY cross.

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