AUD/JPY Price Forecast: Gains hold above 110.50 as outlook remains bearish below 100-day SMA

• AUD/JPY trades near 110.75 as buyers return in early European trading on Tuesday.
• Below the 100-day SMA, the cross retains a bearish bias, although improving RSI momentum leaves scope for a short-lived recovery.
• Initial support stands at 110.20, with 111.20 marking the nearest resistance to monitor.

Australia’s September inflation figures, due on Wednesday, are the next key data release as AUD/JPY trades higher at around 110.75 in Tuesday’s early European session. A hawkish stance from the Reserve Bank of Australia (RBA) is lending some support to the Australian Dollar (AUD) against the Japanese Yen (JPY). Attention will then turn to Friday’s Bank of Japan (BoJ) interest rate decision.

According to the ASX RBA Rate Tracker, markets now assign nearly a 62% probability to an interest rate rise to 4.85% at the next RBA Board meeting. RBA Assistant Governor Sarah Hunter signalled that further increases are likely when policymakers meet early next month, saying the central bank is “not quite yet” finished with its fight against inflation.

Forecasts for Australia’s Consumer Price Index (CPI) report point to annual inflation of 4.2% in September, with a monthly increase of 0.7% projected for September. Traders are looking to the release for a fresh catalyst, and evidence of stronger inflation could lend the Aussie near-term support.

At Friday’s October policy meeting, the BoJ is expected to leave its interest rate unchanged at 1.25%. Analysts said the central bank is unlikely to offer explicit guidance on when, or how quickly, further rate rises might follow. It must weigh the need to head off an inflation overshoot against the risk that a premature increase could unsettle already nervous markets.

Yen finds support as swaps price in a December BoJ rate rise

Brown Brothers Harriman analysts describe the BoJ as “widely expected to keep rates on hold at 1.25% and assess September’s 25bps hike before tightening again.” They draw attention to the caution expressed by Governor Kazuo Ueda in September: he warned that “rapid rate hikes could unsettle asset prices,” while emphasising that “it could take some time to confirm that 2% inflation is entrenched.”

Nevertheless, BBH maintains that “firmer underlying inflation leaves scope for a more hawkish Outlook Report, lifting BoJ rate expectations in favor of JPY.” To illustrate the change in market expectations, the analysts note that “the swaps curve price in 75% odds of a 25bps BoJ rate hike to 1.50% at the December 18 meeting and nearly 75bps of tightening in the next twelve months.”

Yen retains support as BoJ’s Himino highlights AI-related inflation risks

A score of 8.2/10 on FXS Speechtracker puts BoJ’s Himino exactly at the historical average, although his focus on stronger underlying inflation and rising expectations gives the remarks a hawkish slant. Robust AI-related demand is boosting capital expenditure and exports. Together with accommodative financial conditions, low real interest rates and rapid bank lending, this strengthens the argument that inflation is moving towards the 2% target, favouring a firmer Yen.

A greater willingness to adjust policy is suggested by warnings that delaying changes could increase upside inflation risks and harm the economy, although the timing remains dependent on incoming data. The emphasis on stable prices through “suitable monetary policy” as a means of securing sustainable growth points to a gradual move away from ultra-loose settings. That backdrop should constrain Yen losses and keep markets attentive to further steps towards policy normalisation.

Technical Analysis: AUD/JPY retains bearish bias below the 100-day SMA

Trading below the 100-day simple moving average (SMA) continues to constrain AUD/JPY on the daily chart. A recovery above the Bollinger Bands’ 20-period middle band points to some short-term stabilisation. Meanwhile, a reading of 52.25 on the Relative Strength Index (14) suggests a modest improvement in momentum, but not enough to challenge the broader bearish structure established by the key SMA above the price.

The Bollinger middle band, around 110.20, offers the first downside support, ahead of the psychological 110.00 mark. Further below, the lower Bollinger band near 109.20 provides another potential cushion, where sellers may pause should the pair start falling again.

The upper Bollinger band near 111.20 presents the nearest upside hurdle, followed by the 100-day SMA at 112.00. A sustained move above the latter could open the way for a rally towards the 18 August high of 113.61.

(The technical analysis of this story was written with the help of an AI tool. Know more.)