• AUD/JPY kicks off the new week on a weaker note and moves away from a multi-year peak.
• Geopolitical risks and intervention fears underpin the JPY and exert pressure on the cross.
• The RBA’s hawkish outlook and BoJ policy uncertainty should help limit any further losses.

The AUD/JPY cross comes under some selling pressure during the Asian session on Monday and snaps an eight-day winning streak to the 99.00 mark, or its highest level since December 2014. Spot prices currently trade around the 98.60 region, with bears now awaiting a sustained break and acceptance below the 100-hour Simple Moving Average (SMA) before positioning for any further losses.

Against the backdrop of geopolitical risks, speculations that Japanese authorities will intervene to stem any further weakness in the domestic currency turn out to be a key factor behind the Japanese Yen's (JPY) relative outperformance. The Australian Dollar (AUD), on the other hand, is weighed down by the risk of a further escalation of tensions between China and Taiwan. This, in turn, is seen exerting some downward pressure on the AUD/JPY cross.

That said, the recent optimism led by hopes for additional stimulus from China might continue to act as a tailwind for the China-proxy Aussie. Apart from this, the Reserve Bank of Australia's (RBA) hawkish stance, signalling that policymakers are unwilling to rule out another cash rate increase in the wake of sticky inflation, could lend support to the AUD. This, in turn, warrants some caution before placing aggressive bearish bets around the AUD/JPY cross.

Meanwhile, a recession in Japan seems to have dashed hope for an imminent shift in the Bank of Japan's (BoJ) policy stance in the coming months. This could keep a lid on any meaningful appreciating move for the JPY and contribute to limiting the downside for the AUD/JPY cross. Hence, it will be prudent to wait for strong follow-through selling before confirming that spot prices have topped out and positioning for a deeper corrective decline.