AUD/JPY Price Forecast: Strengthens above 110.00, while bearish technical bias persists
- AUD/JPY gathers strength to around 110.20 in Tuesday’s early European session.
- The negative outlook of the cross remains intact, with bearish RSI momentum.
- The first upside barrier emerges at 110.60; the initial support level to watch is 100.00.
The AUD/JPY cross trades in positive territory near 110.20 during the early European trading hours on Tuesday. Traders await the speech from the Bank of Japan (BoJ) Governor Kazuo Ueda later on Tuesday for more clues on the interest rate outlook.
The BoJ could indicate later this month that underlying inflation has reached nearly its 2% target, according to three sources familiar with the central bank’s thinking. Such a signal would underscore the central bank’s willingness to resume raising interest rates in the coming months.
The sources said after hiking rates in September, some BoJ policymakers remain cautious about another rate increase this month. They would prefer to assess more economic data and evaluate how previous rate hikes have influenced domestic financial conditions before making another move.
On the Aussie front, money markets are now betting the Reserve Bank of Australia (RBA) will likely raise rates at its November policy meeting. The probability of a rate hike fell to around 20%, data from LSEG showed.
Japan and Korea inflation data keep BoJ and BoK on policy alert
Analysts at MUFG/BTMU note that the latest inflation releases from Korea and Japan have kept market attention firmly on underlying price pressures, even as headline moves diverge. In Korea, they point out that "CPI inflation eased to 2.9%yoy in September, matching consensus and down from 3.1%yoy," suggesting some moderation but not enough to take inflation off the policy radar.
In contrast, Japan’s data surprised to the upside. MUFG/BTMU highlight that "headline Tokyo CPI, which serves as a leading proxy for nationwide inflation, accelerated to 2.7%yoy in September, above the 2.5% consensus and 1.9% in August." More strikingly, they stress that "core Tokyo CPI excluding fresh food and energy rose markedly to 3.0%yoy, above the 2.5% consensus and 2.0%yoy in August, marking its highest reading under the Takaichi administration." Taken together, MUFG/BTMU judge that these readings "should keep both the BoK and BoJ attentive to inflation and the need for policy tightening," reinforcing the focus on policy trajectories and, by extension, regional currency positioning.
Technical Analysis: AUD/JPY keeps a bearish vibe under the 100-day SMA
In the daily chart, AUD/JPY retains a bearish near-term bias as price holds beneath the Bollinger middle band (20-period simple moving average) and the 100-day moving average. The pair is further capped by the upper Bollinger band, while the Relative Strength Index (14) around 40.8 sits in a neutral-to-soft range, hinting that selling pressure prevails but without oversold conditions.
On the topside, initial resistance is located near the Bollinger middle band at 110.60, en route to a stronger barrier at the upper Bollinger band around 112.15. Any follow-through buying above this level could pave the way to the 100-day moving average near112.55.
On the flip side, the next meaningful support emerges at the 100.00 psychological level, followed by the lower limit Bollinger band around 109.10. A decisive break would open room for a deeper slide towards the October 1 low of 108.71.
(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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