AUD/JPY Price Forecast: Weakens to near 113.50, but broader uptrend remains intact
- AUD/JPY drifts lower to near 113.50 in Friday’s early European session.
- Surprise rise in Australia’s Unemployment Rate will give RBA more reason to delay further rate hike at the June meeting.
- The constructive outlook of the cross prevails above the 100-day EMA, with neutral-to-mildly bullish RSI momentum.
- The first upside barrier emerges at 113.65; the initial support level to watch is 112.50.
The AUD/JPY cross trades in negative territory around 113.50 during the early European session on Friday. The Australian Dollar (AUD) softens against the Japanese Yen (JPY) as markets slash the chance of more interest rate hikes from the Reserve Bank of Australia (RBA) after a surprise rise in the jobless rate.
Australia’s Unemployment Rate jumped to 4.5% in April from 4.3% in March, the Australian Bureau of Statistics showed on Thursday. This reading registered the highest in about four and a half years. The report will provide the Australian central bank with more reason to hold off on a fourth rate hike at its next meeting in June, which could weigh on the Aussie.
The probability of a rate hike at the next meeting dropped to just 3%, from 13% before the release of the employment report, according to financial market pricing provided by Westpac.
On the other hand, softer Japanese inflation data could weigh on the JPY and act as a tailwind for the cross. Japan’s National Consumer Price Index (CPI) rose by 1.4% YoY in April, compared to 1.5% in March, the Japan Statistics Bureau revealed on Friday.
Meanwhile, Japan's core CPI climbed by 1.4% YoY in April, marking the slowest annual pace in four years.
Technical Analysis:
In the daily chart, AUD/JPY holds comfortably above the 100-day Simple Moving Average (SMA) at 110.70, keeping the broader bias constructive despite the latest pullback from recent highs. Price is now trading just under the Bollinger Bands’ 20-day SMA basis line, suggesting topside momentum has slowed but not broken, while the Relative Strength Index (14) near 51 hints at neutral-to-mildly positive momentum rather than overbought conditions.
On the topside, immediate resistance is located at the Bollinger middle band around 113.65, with a break higher opening the way toward the May 14 high of 114.66. The next hurdle is seen at the upper Bollinger band near 114.83. On the downside, initial support emerges at the lower Bollinger band around 112.50, ahead of the April 13 low of 111.66. The key trend support is located at the 100-day SMA near 110.70, where buyers would be expected to defend the prevailing uptrend on deeper pullbacks.
(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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