AUD/JPY Price Forecast: Flatlines below 110.50, while technicals signal lingering bearish bias
- AUD/JPY holds steady near 110.40 in Wednesday’s early European session.
- The cross retains a negative bias below the 100-day SMA, with bearish RSI momentum.
- The initial support level emerges at 110.00; the first upside barrier is seen at 110.60.
The AUD/JPY cross trades on a flat note around 110.40 during the early European trading hours on Wednesday. Nonetheless, Bank of Japan (BoJ) Governor Kazuo Ueda on Tuesday delivered comments that were less hawkish than markets had expected, which could weigh on the Japanese Yen (JPY) against the Australian Dollar (AUD).
BoJ Governor Kazuo Ueda stated on Tuesday that the central bank would "assess the likelihood and risks of the baseline economic and price outlook being realized" when considering the pace and timing of future rate hikes. Market views that the BoJ would take a cautious stance on rate hike at its October monetary policy meeting.
Markets are now pricing in nearly a 12% chance of a rate hike this month, down from as high as 40% early last week, according to Bloomberg. The current odds surge to around 90% when the December meeting is included.
BoJ shift to inflation stabilisation tempers expectations for rapid tightening
Analysts at Rabobank argue that the BoJ “now appears to have reached the point when it can instead shift its focus to stabilising price pressures around the target level,” marking a notable transition in its policy stance. However, they caution that “the Bank is still not widely viewed as being in a position in which back-to-back rate rises are appropriate,” despite this shift.
Rabobank notes that BoJ Governor Ueda this morning reiterated that policymakers intend to “continue raising the policy interest rate,” while at the same time describing the Japanese economy as growing “moderately.” In Rabobank’s view, “this may suggest that a hastened pace of rate hikes is possible, though clearly that depends on how the economy develops in the months ahead,” yet the combination of moderate growth and cautious signalling “strengthens the market’s expectation that back-to-back rate hikes BoJ are unlikely.”
Technical Analysis: AUD/JPY maintains a negative outlook under the 100-day SMA
In the daily chart, AUD/JPY keeps a bearish near-term tone as spot remains below the 100-day simple moving average (SMA) and the upper Bollinger Band. Price is hovering just beneath the Bollinger middle band, hinting that rallies are still being capped by this pivot area, while the Relative Strength Index (RSI) at 43.37 stays below neutral, suggesting subdued upside momentum.
On the downside, the initial support level is located at the 110.00 psychological level, en route to September 14 low of 109.67, and then the lower Bollinger Band around 109.10. A decisive break below this level could expose the October 1 low of 108.71.
On the topside, immediate resistance level is seen at the Bollinger middle band at 110.60, followed by the upper boundary of Bollinger Band at 112.11. Further north, the next upside target to watch is the 100-day SMA at 112.50.
(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.