AUD/JPY Price Forecast: Climbs ahead of RBA decision, floats around 93.50
- AUD/JPY forms bullish engulfing pattern after clearing Ichimoku Cloud, signaling further upside potential.
- Key resistance seen at Tenkan-sen (93.95), followed by 94.36 and May’s cycle high at 95.63.
- A drop below 92.73 could expose 92.63 support, with deeper downside toward the Kumo top near 91.65.
The AUD/JPY rallied on Monday, gaining over 0.30% as traders brace for the Reserve Bank of Australia (RBA) monetary policy decision. Nevertheless, news that the People's Bank of China (PBoC) might reduce rates and improve risk appetite, as the central bank takes measures to propel China’s economy. At the time of writing, the pair trades at 93.58.
AUD/JPY Price Forecast: Technical outlook
The AUD/JPY has consolidated during the last two trading days after edging above the Ichimoku Cloud (Kumo), triggering a bullish signal. A ‘bullish engulfing’ candle chart pattern formed, opening the door for further upside, but buyers need a decisive break above the Tenkan-sen at 93.95.
In that outcome, AUD/JPY next resistance would be 94.00, followed by the May 15 daily high of 94.36. Once cleared the next stop would be the latest cycle high of May 13 at 95.63.
Conversely, if AUD/JPY tumbles below the May 16 swing low of 92.73, bears could send the pair drifting towards the Kijun-sen at 92.63, ahead of the top of the Kumo at 91.65/80.
AUD/JPY Price Chart – Daily
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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