AUD/JPY Price Forecast: Constructive outlook remains intact above 109.00
- AUD/JPY softens to near 109.15 in Wednesday’s early European session.
- The cross keeps the positive bias above the 100-day EMA, with bullish RSI momentum.
- The first downside target is located at 108.00; the immediate resistance level is seen at 110.80.
The AUD/JPY cross loses ground around 109.15 during the early European session on Wednesday. Foreign inflows into Japanese equities following Prime Minister Sanae Takaichi's landslide election victory increase demand for the Japanese Yen (JPY) against the Australian Dollar (AUD).
On the other hand, hawkish remarks from the Reserve Bank of Australia (RBA) policymaker might lift the Aussie. RBA Deputy Governor Andrew Hauser said on Wednesday that inflation was too high and policymakers were committed to doing whatever was necessary to bring it to heel. Markets currently priced in nearly a 70% probability that the interest rates will rise to 4.10% at the RBA's May meeting, following the release of first-quarter (Q1) inflation report.
Technical Analysis:
In the daily chart, AUD/JPY holds well above the 100-day EMA, maintaining the medium-term bullish bias. The average slopes higher, underscoring persistent trend strength. RSI at 60.70 remains in positive territory, indicating supportive momentum without overbought conditions. A daily close above the upper band at 110.80 would extend the advance. On dips, the 20-day SMA at 108.00 offers initial support, while the 100-day EMA at 103.57 underpins the structure.
Bollinger Bands show price pressing near the upper band as the envelope widens, reflecting strengthening bullish pressure and rising volatility. The broader bias stays higher while volatility expansion favors trend continuation, with setbacks expected to be shallow above the aforementioned supports.
(The technical analysis of this story was written with the help of an AI tool.)
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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