AUD/JPY Price Forecast: Edges higher above 112.50 as mildly bullish bias persists
- AUD/JPY drifts higher to near 112.70 in Wednesday’s early European session.
- The cross keeps a mildly bullish tone, with the RSI slightly holding above the midline.
- The initial support level is seen at 112.50; the immediate resistance level to watch is 113.55.
The AUD/JPY cross gathers strength to around 112.70 during the early European session on Wednesday. Nonetheless, renewed tensions between the US and Iran, and fears of possible intervention by Japanese authorities might support the Japanese Yen (JPY) and cap the upside for the cross.
BBC reported on Tuesday that the US launched "powerful" strikes on Iran in response to attacks on three oil tankers in the Strait of Hormuz. US Central Command (Centcom) said that it had hit over 80 targets, including more than 60 Islamic Revolutionary Guard Corps (IRGC) small boats in the strait.
Technical Analysis:
In the daily chart, AUD/JPY holds above the 100-day moving average (MA) and the Bollinger Bands’ (20) middle band, keeping the broader trend supported after the latest rebound. Price is also comfortably above the lower Bollinger band, while the Relative Strength Index (14) around 51 suggests neutral-to-mildly positive momentum rather than an overstretched rally.
On the downside, the immediate technical floor aligns with the 100-day MA at 112.50 and the Bollinger middle band at 112.43, forming a nearby demand zone; a daily close below this area would expose the lower Bollinger band at 111.15. On the upside, the first upside barrier emerges at the June 16 high of 113.55, en route to the the Bollinger Bands’ upper band of 113.70.
(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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