AUD/JPY Price Forecast: Rebounds above 112.50, while staying constrained below 100-day SMA
- AUD/JPY gains traction to around 112.80 in Friday’s early European session.
- The cross retains a bearish tone below the 100-day SMA.
- The first upside barrier emerges at 113.20; the initial support level to watch is 111.80.
The AUD/JPY cross trades in positive territory near 112.80 during the early European trading hours on Friday. However, the potential upside for the cross might be limited as traders ramped up bets on a Bank of Japan (BoJ) interest rate hike, boosting the Japanese Yen (JPY).
BoJ board member Hajime Takata said on Wednesday that the central bank should conduct interest rate hikes nimbly to counter intensifying inflationary pressures, rather than adhere to a fixed semiannual pace anticipated by markets. Analysts believe the Japanese central bank could be more hawkish than previously expected when it meets on September 17 to 18.
“This feels less like a short squeeze and more like the market cautiously reassessing a more hawkish BOJ path,” said Masahiko Loo, senior fixed income strategist at State Street Investment Management in Tokyo. “Markets are finally starting to buy into the idea that Japan may continue normalizing policy into 2027,” Loo added.
Yen outlook tempered as BNY questions power of intervention alone
Strategists at BNY caution that, despite recent official action, they "remain skeptical that Japanese authorities can generate sustained JPY appreciation through intervention alone." They argue that the government’s policy stance "remains reflationary," and that "today’s backdrop is very different from the early Abenomics period: inflation is already materially higher and structural reform is less prominent." Even so, BNY stresses that this does not automatically imply further currency weakness, noting that "does not mean the yen must weaken further."
Technical Analysis: AUD/JPY remains capped under the 100-day SMA
In the daily chart, AUD/JPY holds a bearish near-term tone as it slips beneath the 100-day simple moving average (SMA) and the Bollinger middle band. This positioning suggests rallies are being capped by the cluster of overhead averages, while the Relative Strength Index (14) around 45 hints at fading upside momentum rather than outright oversold conditions.
On the topside, initial resistance comes at the 100-day SMA around 113.20, followed closely by the Bollinger middle band near 113.40. A sustained break above these levels would be needed to ease the current downside pressure, with the upper Bollinger band near 115.05 as a more distant cap.
On the downside, the lower Bollinger band, now sitting near 111.80, acts as the next key support zone. Any follow-through selling below this level could expose the July 3 low of 111.33, followed by the August 4 low of 110.01.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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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