AUD/JPY Price Forecast: Weakens to near 110.00, keeping bearish bias below 100-day SMA
- AUD/JPY softens to near 110.10 in Friday’s early European session.
- Japan’s CPI inflation exceeded BoJ's 2% target for the first time this year, bolstering the case for a near-term rate hike.
- The cross keeps a bearish vibe below the 100-day SMA.
- The first downside target to watch is 109.20; the immediate resistance level is seen in the 111.00-111.10 region.
The AUD/JPY cross trades in negative territory around 110.10 during the early European trading hours on Friday. The Japanese Yen (JPY) edges higher against the Australian Dollar (AUD) as Japan’s National Consumer Price Index (CPI) inflation rises above the Bank of Japan’s (BoJ) target level for the first time in nine months, supporting the case for a widely expected interest rate hike in December.
Japan’s National CPI rose 2.1% YoY in September, compared to a 1.9% growth in August, the Statistics Bureau of Japan showed on Friday. Additionally, the core CPI, which excludes volatile fresh food but includes fuel costs, climbed 2.1% YoY in September, versus a 1.8% rise in August. This figure came in line with the consensus.
The CPI that strips out both fresh food and energy, which is closely watched by the BOJ as a better gauge of demand-driven price pressures, jumped 2.4% in September from a year earlier after increasing 2.0% in August.
The majority of economists polled by Reuters expect a rate hold next week, followed by a quarter-point hike at the following meeting in December.
BoJ seen holding at 1.25% as hawkish tone keeps next hike debate alive
Analysts at Standard Chartered expect the BoJ to “keep the policy rate unchanged at 1.25% at its 29-30 October meeting, following September’s 25bps hike,” but stress that the stance will remain far from neutral. They write that “we expect policy makers to maintain a clearly hawkish tone,” noting that “the debate is increasingly shifting from whether the BoJ will hike again to when the next hike will occur.” In their view, “while December is now a live meeting, January 2027 remains our base case for the next hike.” At the same time, Standard Chartered argues that “the BoJ has an incentive to continue policy normalisation to support yield differentials and reduce the risk of renewed JPY weakness, particularly if the Fed resumes tightening or maintains a restrictive policy stance for longer than expected.”
BoJ’s Himino flags AI-led capex and rising inflation risks as Yen outlook turns more hawkish
BoJ’s Himino scores 8.2/10 on FXS Speechtracker, exactly in line with the historic average, but the tone is clearly more hawkish as underlying inflation nears the 2% target and expectations keep rising. Strong AI-driven demand lifting capex and exports, combined with low real rates and rapid bank lending, underscores that accommodative conditions are increasingly inconsistent with the upside price risks highlighted in the speech.
The warning that postponing policy changes could trigger inflation risks and damage the economy reinforces a bias toward earlier normalization, which is supportive of the Yen on a medium-term horizon. The emphasis that stable prices achieved through suitable monetary policy would enhance Japan’s sustainable growth suggests BoJ tolerance for tighter settings ahead, even if near-term moves remain data-dependent.
Technical Analysis: Negative outlook for AUD/JPY remains intact below the 100-day SMA
In the daily chart, AUD/JPY keeps a bearish near-term bias as spot holds under the Bollinger middle band and remains well below the 100-day simple moving average (SMA). The upper Bollinger band adds to the overhead supply, suggesting rallies are likely to be capped before challenging the medium-term trend line represented by the 100-day SMA. The Relative Strength Index (14) at 45.43 sits just below neutral, hinting at subdued bullish momentum and reinforcing the impression of a corrective bounce within a broader downside phase rather than a trend reversal.
On the downside, initial support level emerges at the lower limit of Bollinger band around 109.20, followed by the October 15 low of 108.64. A decisive break below this floor would open the way for a deeper slide toward the February 13 low of 107.69.
On the topside, immediate resistance level is located in the 111.00- 111.10 zone, representing the psychological level and the upper boundary of Bollinger band. A daily close above the latter could pave the way to the 100-day SMA at 112.05, en route to the June 16 high of 113.55 and then the July 27 high of 114.67.
(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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