AUD/JPY Price Forecast: Recovers above 110.50, but technical outlook stays bearish

AUD/JPY rebounds to near 110.85 in Monday’s early European session.
RBA is widely expected to hike interest rates by 25 bps at its September meeting on Tuesday.
The cross retains a negative outlook, with bearish RSI momentum.
The first upside barrier emerges at 111.45; the next contention level to watch is 100.00.

The AUD/JPY cross trades in positive territory around 110.85, snapping the four-day losing streak during the early European session on Monday. The Australian Dollar (AUD) strengthens against the US Dollar (USD) as increasingly sticky inflation underpins a hawkish outlook for the Reserve Bank of Australia (RBA).

Análisis de TMGM: noticias de mercados financieros, calendario económico e información del mercado

The RBA is anticipated to hike the Official Cash Rate (OCR) from 4.35% to 4.60% at the conclusion of a meeting on Tuesday. That would be the fourth increase in 2026 and mark its highest level rate since 2011.

“The ongoing escalation of the conflict in the Middle East and the tendency of the RBA to view the resultant increase in oil prices as much more of an inflation shock than a growth shock… makes us view two rate hikes (September and November) as more likely than one,” said ANZ analysts last week.

Attention will shift to Australia’s August Consumer Price Index (CPI) inflation data on Wednesday. The headline CPI is expected to show a rise of 4.1%. Any signs of hotter inflation in Australia could lift the Aussie against the Japanese Yen (JPY) in the near term.

Traders remain on high alert for currency intervention from Japanese authorities, which might cap the downside for the JPY. Japan's Prime Minister Takaichi Sanae said on Friday that US President Donald Trump expressed concern about the Yen's weakness during their latest summit.

Meanwhile, Japanese Finance Minister Katayama Satsuki reconfirmed "the yen's undervaluation is problematic" after speaking by phone with US Treasury Secretary Scott Bessent.

RBA seen delivering decisive hike as Australia data stays hot

Economists at ING expect the RBA to “deliver a decisive 25bp rate hike on Tuesday,” arguing that the move reflects “an economy that continues to run hot across multiple fronts.” They highlight that “labour market conditions remain tight, second-quarter GDP growth surprised to the upside, and recent inflation readings came in stronger than expected,” reinforcing the case for further tightening. ING also points to upcoming price data, noting that “August CPI data is likely to accelerate further to 4.1% year-on-year, driven primarily by higher diesel and food prices, alongside persistent underlying core inflation pressures.”

Technical Analysis: AUD/JPY remains capped under the 100-day SMA

In the daily chart, AUD/JPY keeps a bearish near-term tone as the spot holds below the 100-day simple moving average (SMA) and the Bollinger middle band. Price is closer to the lower end of the Bollinger envelope, while the Relative Strength Index (RSI) holds below the midline at 41.58, hinting at weak but not oversold downside momentum.

On the topside, initial resistance level emerges at the Bollinger middle band near 111.45, en route to the September 22 high of 112.22 and the 100-day SMA around 112.80. A decisive break above this level could pave the way to the upper boundary Bollinger band near 113.70.

On the downside, the critical support level is located at the 100.00 psychological level. Further south, the lower limit Bollinger band at 109.25 acts as the next key support, where sellers may start to lose traction if tested.

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

RBA FAQs

What is the Reserve Bank of Australia and how does it influence the Australian Dollar?

The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.

How does inflation data impact the value of the Australian Dollar?

While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.

How does economic data influence the value of the Australian Dollar?

Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.

What is Quantitative Easing (QE) and how does it affect the Australian Dollar?

Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.

What is Quantitative tightening (QT) and how does it affect the Australian Dollar?

Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.

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