• AUD/JPY regains positive traction and reverses a part of Friday’s heavy losses to a multi-week low.
• Diminishing odds for an immediate BoJ rate hike undermine the JPY and lend support to the cross.
• A modest AUD strength contributes to the move, though a combination of factors might cap gains.

The AUD/JPY cross attracts some buyers during the Asian session on Monday and reverses a part of Friday's slump to the 95.00 neighborhood, or a nearly four-week low. Spot prices climb to a fresh daily peak, around the 95.80 region in the last hour, and draw support from a combination of factors.

Bank of Japan (BoJ) Governor Kazuo Ueda downplayed inflation risks and didn't show any real intention to hike rates anytime soon last week. Adding to this, domestic political uncertainty could further complicate the BoJ's policy normalization path, which is seen as a key factor behind the Japanese Yen's (JPY) relative underperformance. Furthermore, some follow-through buying around the Australian Dollar (AUD) acts as a tailwind for the AUD/JPY cross.

Meanwhile, the BoJ revised up its inflation forecasts last Thursday and offered a less gloomy outlook on the economy, keeping hopes alive for an imminent interest rate hike later this year. This, along with a weaker tone around the equity markets, could offer some support to the safe-haven JPY. The AUD, on the other hand, might struggle to attract any meaningful buyers amid bets that the Reserve Bank of Australia (RBA) would lower borrowing costs again.

In fact, traders have become increasingly confident that the RBA will cut interest rates in August amid signs of easing labor market conditions. This, in turn, makes it prudent to wait for strong follow-through buying before positioning for the resumption of the AUD/JPY pair's recent well-established uptrend witnessed over the past month or so. Traders now look forward to the release of the Monetary Policy Meeting Minutes on Tuesday for a fresh impetus.