AUD/JPY Price Forecast: Rallies above 93.00 on risk appetite, as bullish engulfing pattern looms
- AUD/JPY prints higher highs and lows; bullish engulfing pattern supports upside continuation.
- Daily close above 94.00 could open path toward 95.63, 97.32, and YTD high at 99.15.
- Failure to hold 93.00 may trigger drop toward 92.00 and Senkou Span B support at 90.83.
The AUD/JPY prolonged its gains on Thursday and edged up over 0.76% amid a risk-on impulse sparked by news that the US and China might reach an agreement as President Trump spoke with China’s President Xi Jinping during the day. At the time of writing the cross-pair trades at 93.30.
AUD/JPY Price Forecast: Technical outlook
The AUD/JPY is upwardly biased, as the pair has formed a series of successive higher highs and lows, indicating that buyers are gathering momentum. Additionally, price action during the last two trading days formed a ‘bullish engulfing’ candle chart pattern, providing traders with two technical reasons the pair is tilted to the upside.
For a bullish continuation, the AUD/JPY needs a daily close above 94.00 if surpassed, the next stop will be the May 13 high of 95.63, followed by February’s high at 97.32, ahead of the year-to-date (YTD) high of 99.15, the January 7 peak
Conversely, if AUD/JPY tumbles below 93.00, expect a drop to challenge May’s 30 low of 92.00; a fall toward the Senkou Span B at 90.83 is on the cards.
AUD/JPY Price Chart – Daily
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
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