AUD/JPY Price Forecast: Bearish indicators strengthen downside bias as pair slips below 109.50

• Selling pressure takes AUD/JPY towards 109.30 as Tuesday’s European session gets under way.
• With RSI signalling bearish momentum, the cross maintains a negative outlook below the 100-day SMA.
• While 110.00 marks immediate resistance, the initial downside objective stands at 108.85.

Strength in the Japanese Yen (JPY), supported by sizeable official intervention, weighs on AUD/JPY during early European trading on Tuesday. The cross is trading lower at around 109.30 as the JPY gains against the Australian Dollar (AUD).

Japan intervened in currency markets on three days between 30 July and 3 August, quarterly data published by the Ministry of Finance (MOF) on Monday showed. At 7.98 trillion JPY ($50.36 billion), the 30 July operation was the largest, surpassing the earlier record of 6.28 trillion JPY on 30 April.

Commenting on the intervention, Tsuyoshi Ueno, senior economist at NLI Research Institute, said: "The enormous scale of intervention underscored the government's sense of urgency to stem the yen's decline,"

Further support for the JPY might come from expectations that the Bank of Japan (BoJ) will raise rates again. Released on Tuesday, the summary of the 29-30 October meeting showed that many board members regard a near-term interest rate increase as necessary, pointing to a good chance of action in December.

Can BoJ tightening expectations and JGB dynamics sustain support for the Yen?

The JPY’s strong showing this year stands out to Rabobank analysts, who note that “the JPY is the second best performing G10 currency in the half year to date.” While acknowledging that this “strong ranking has been obtained with the support of sizeable FX intervention over 3 days during the summer, which included joint support with the US Treasury,” they emphasise that the currency has also held its ground recently. Assessing its more recent performance, they observe that “the JPY has managed to outperform the USD on a 1-month view with the market displaying a clear reluctance to push USD/JPY above the 158.70 area which coincides with the 200-day sma.”

Despite noting that the “sell-off in the Nikkei 225 at the end of last week depressed market expectations regarding the chances of a December BoJ rate hike,” Rabobank argues that “the strength of September wage data supports the potential for further policy tightening both next month and into next year.” The analysts believe this backdrop “suggests USD/JPY can edge lower to the 155.00 area on a 3-month view.” A further consideration, they say, is that “another component of any JPY turnaround would likely be a more robust tone in the JGB market,” which “could contribute to a more supportive backdrop for the JPY in the months ahead.”

Turning to domestic conditions, Rabobank points out that “Japan’s primary deficit is better than the G7 average and there is speculation that Japan’s huge asset managers may be tempted to repatriate to take advantage of higher JGB yields. This would have positive implications for the JPY.” As for upcoming releases, the analysts note that “Q3 GDP data and October national CPI inflation, both due next week, will be of interest to BoJ watchers,” adding that they “remain cautiously optimistic on the medium-term outlook for the JPY.”

Technical Outlook: Can AUD/JPY shake off its bearish bias below the 100-day SMA?

Trading below both the 20-day and 100-day simple moving averages, AUD/JPY continues to show a bearish near-term bias on the daily chart. The cross is retreating towards support at the lower Bollinger Band. Meanwhile, the Relative Strength Index (14), at around 41, remains under the neutral 50 mark, suggesting sellers retain control despite the recent recovery from oversold territory.

Immediate downside support lies at 108.85, the lower Bollinger Band boundary. Should the cross decisively breach that floor, the 6 November low at 108.24 would come into focus, ahead of the 13 February low at 107.70. 

For any recovery, the psychological 110.00 mark presents the first resistance, followed by the 20-day SMA at 110.30. Beyond these levels, the key obstacle is the 110.70-110.75 area, where the upper Bollinger Band boundary and the 100-day SMA form a concentrated supply zone. Reclaiming this area would be necessary to temper the prevailing bearish bias.

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