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AUD/JPY Price Forecast: Holds gains above 110.50, but bearish outlook persists below 100-day SMA
- AUD/JPY attracts some buyers to near 110.75 in Tuesday’s early European session.
- The cross keeps a bearish vibe below the 100-day SMA; a temporary rebound cannot be ruled out amid improving RSI momentum.
- The first support level is seen at 110.20; the immediate resistance level to watch is 111.20.
The AUD/JPY cross trades in positive territory around 110.75 during the early European trading hours on Tuesday. Hawkish tone from the Reserve Bank of Australia (RBA) provides some support to the Australian Dollar (AUD) against the Japanese Yen (JPY). Australia’s September inflation data will be the highlight later on Wednesday. On Friday, the Bank of Japan (BoJ) interest rate decision will take center stage.
RBA Assistant Governor Sarah Hunter said that the central bank “not quite yet" is done fighting inflation, signaling further rate hikes are likely when policymakers meet early next month. Markets are now pricing in nearly a 62% chance of an interest rate increase to 4.85% at the next RBA Board meeting, according to the ASX RBA Rate Tracker.
Traders await the Australian Consumer Price Index (CPI) report for fresh impetus. Economists expect the annual CPI to show a rise of 4.2% in September, while the monthly CPI is projected to show an increase of 0.7% in September. Any signs of hotter inflation in Australia could boost the Aussie in the near term.
The BoJ is expected to keep the interest rate steady at 1.25% at the October policy meeting on Friday. Analysts said the Japanese central bank is likely to avoid dropping explicit hints on the timing and pace of future rate rises as it balances the need to forestall risks of an inflation overshoot without disrupting jittery markets with a premature hike.
BoJ rate path in focus as swaps price in December move and support for Yen
Analysts at Brown Brothers Harriman note that the BoJ is “widely expected to keep rates on hold at 1.25% and assess September’s 25bps hike before tightening again.” They highlight Governor Kazuo Ueda’s cautious tone in September, when he warned that “rapid rate hikes could unsettle asset prices,” and stressed that “it could take some time to confirm that 2% inflation is entrenched.”
Even so, BBH argues that “firmer underlying inflation leaves scope for a more hawkish Outlook Report, lifting BoJ rate expectations in favor of JPY.” Reflecting this shift in market pricing, they point out that “the swaps curve price in 75% odds of a 25bps BoJ rate hike to 1.50% at the December 18 meeting and nearly 75bps of tightening in the next twelve months.”
BoJ’s Himino flags AI-driven inflation risks, keeping Yen underpinned
BoJ’s Himino scores 8.2/10 on FXS Speechtracker, exactly in line with the historic average, but the emphasis on rising underlying inflation and expectations marks a hawkish tilt. Strong AI-related demand lifting capex and exports, alongside accommodative financial conditions, low real rates and rapid bank lending, reinforces the case that inflation is converging toward the 2% target, supporting a firmer Yen bias.
Warnings that postponing policy changes could heighten upside price risks and damage the economy signal growing readiness to adjust policy, even if timing remains data-dependent. The focus on achieving stable prices through “suitable monetary policy” to secure sustainable growth suggests BoJ is edging away from ultra-easy settings, a backdrop that should limit Yen downside and keep markets alert for future normalization steps.
Technical Analysis: Negative outlook of AUD/JPY remains intact below the 100-day SMA
In the daily chart, AUD/JPY maintains a capped tone as it holds below the 100-day simple moving average (SMA). Price has recovered back above the Bollinger Bands’ 20-period middle band, suggesting some near-term stabilization, while the Relative Strength Index (14) at 52.25 hints at mildly improving momentum that has yet to challenge the overarching bearish structure defined by the dominant SMA overhead.
On the downside, initial support level is seen at the Bollinger middle band around 110.20, followed by the 110.00 psychological level. A deeper cushion is located at the lower limit of Bollinger band near 109.20, where sellers could hesitate if the pair resumes its decline.
On the topside, immediate resistance level appears at the uppber boundary of Bollinger band near 111.20, en route to the 100-day SMA at 112.00. Sustained trading above this level could see a rally to the August 18 high of 113.61.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
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