AUD/JPY snaps three-day winning run ahead of the RBA's rate decision

• AUD/JPY dipped on Monday despite improved risk sentiment.
• RBA expected to cut rates to record lows.

AUD/JPY fell 0.33% on Monday, ending the three-day winning run, as expected the Reserve Bank of Australia (RBA) easing overshadowed improved risk appetite.

Equities picked up a bid on Monday with the S&P 500 index rising to record highs on optimism for progress in the Sino-US trade talks. The US President Trump and his Chinese counterpart Xi Jinping agreed on Saturday to resume trade talks. Further, Trump eased sanctions on Huawei Technologies and delayed new tariffs on China.

As a result, the anti-risk JPY was offered across the board. Even so, the AUD/JPY pair fell as markets offered the Australian Dollar on expectations the RBA would cut rates by 25 basis points to a new record low of 1.00% on Tuesday.

As of writing, the AUD/JPY pair is trading at 75.61, representing 0.10% gains on the day, having hit a low of 75.42 earlier today.

The RBA's rate decision is due at 04:30 GMT today and will be followed by Governor Philip Lowe's speech at 09:30 GMT.

It is worth noting that the market is already priced for a 25 basis point rate cut. As a result, the AUD will likely pick up a strong bid if the RBA cuts rates as expected, but sounds less dovish-than-expected, forcing markets to scale back expectations of another rate cut before the year-end.

While a significant majority out there expects the RBA to cut rates today, HSBC and a few others believe the RBA would stand pat and cut rates in August.  

Pivot levels