AUD/JPY Price Forecast: Keeps bullish vibe near 108.50 amid Japan's fiscal and political challenges

• AUD/JPY gathers strength to around 108.50 in Thursday’s early European session.

• The positive outlook for the cross remains intact as the price holds above the 100-day EMA, with bullish RSI momentum.

• The initial support level is located at 106.35.

The AUD/JPY cross extends the rally to near 108.50 during the early European session on Thursday. Concerns over fiscal health and political uncertainty in Japan weigh on the Japanese Yen (JPY) against the Australian Dollar (AUD). Japan's Prime Minister Sanae Takaichi unveiled plans to pause the country’s consumption tax if her Liberal Democratic Party wins the February 8 election.

Meanwhile, speculation about a possible intervention by Japanese authorities might help limit the JPY’s losses. Takaichi warned over the weekend that officials stand ready to take necessary steps against speculative and highly abnormal market moves.

Technical Analysis:

In the daily chart, AUD/JPY holds above the 100-day EMA, keeping the broader uptrend intact. Price sits marginally above the upper Bollinger Band at 108.39, indicating a stretched advance as the bands widen. RSI at 68.31 is close to the overbought threshold and confirms firm bullish momentum. A daily close above the band could extend the move, while rejection would open a corrective slide toward the middle band.

Bollinger Bands remain in expansion, keeping volatility elevated as the trend extends. The 100-day EMA at 102.46 remains a deeper trend floor. RSI below 70 leaves limited room before overbought conditions; a downtick from here would flag consolidation rather than a reversal. The initial support is seen at the middle band of 106.35, followed by the lower Bollinger Band at 104.35. Staying above the rising middle band would keep the bullish bias intact.