AUD/JPY Price Forecast: Will Bearish Bias Hold Below 100-day SMA as Pair Slips Towards 110.00?

• Selling pressure takes AUD/JPY towards 110.10 as Friday’s European session gets under way.
• The case for a near-term rate increase strengthens as Japan’s CPI inflation moves above the BoJ’s 2% target for the first time this year.
• Below the 100-day SMA, the cross retains a bearish bias.
• While 109.20 marks the initial downside target, the 111.00-111.10 area offers immediate resistance.

A firmer Japanese Yen (JPY) weighs on the Australian Dollar (AUD), leaving AUD/JPY lower at around 110.10 in early European trade on Friday. Supporting the Yen, Japan’s National Consumer Price Index (CPI) inflation has exceeded the Bank of Japan’s (BoJ) target for the first time in nine months, strengthening the argument for a widely anticipated interest rate increase in December.

Figures released by the Statistics Bureau of Japan on Friday showed that annual National CPI inflation accelerated to 2.1% in September from 1.9% in August. Core CPI, which removes volatile fresh food prices but retains fuel costs, also increased 2.1% YoY in September, up from 1.8% in August and matching the consensus estimate.

Excluding both fresh food and energy, CPI climbed 2.4% year-on-year in September, following a 2.0% increase in August. The BOJ closely monitors this measure as a better indicator of demand-led price pressures.

A Reuters poll showed that most economists anticipate unchanged rates next week, with a quarter-point increase expected at the subsequent meeting in December.

Will the BoJ hold at 1.25% while keeping a hawkish tone on the next hike?

Although Standard Chartered analysts expect the BoJ to “keep the policy rate unchanged at 1.25% at its 29-30 October meeting, following September’s 25bps hike,” they emphasise that its stance will be far from neutral. Their assessment states that “we expect policy makers to maintain a clearly hawkish tone,” adding that “the debate is increasingly shifting from whether the BoJ will hike again to when the next hike will occur.” On the timing, they say, “while December is now a live meeting, January 2027 remains our base case for the next hike.” Standard Chartered also contends that “the BoJ has an incentive to continue policy normalisation to support yield differentials and reduce the risk of renewed JPY weakness, particularly if the Fed resumes tightening or maintains a restrictive policy stance for longer than expected.”

Do Himino’s warnings on inflation and AI-led capex signal a more hawkish Yen outlook?

With underlying inflation approaching the 2% target and expectations continuing to climb, BoJ’s Himino has struck a distinctly more hawkish tone. His FXS Speechtracker score of 8.2/10 nevertheless matches the historic average exactly. Robust AI-related demand is boosting capital expenditure and exports, while low real interest rates and brisk bank lending further highlight how accommodative conditions are becoming increasingly at odds with the upside inflation risks outlined in the speech.

Himino’s warning that delaying policy adjustments could create inflation risks and harm the economy strengthens the case for earlier normalisation, supporting the Yen over the medium term. His emphasis on stable prices, secured through appropriate monetary policy, enhancing Japan’s sustainable growth also points to BoJ tolerance for tighter policy ahead. Near-term decisions, however, remain dependent on incoming data.

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

AUD/JPY’s daily chart continues to favour near-term downside, with the spot rate trading below the middle Bollinger band and considerably beneath the 100-day simple moving average (SMA). Additional overhead supply at the upper Bollinger band suggests that recoveries are likely to stall before testing the medium-term trend line represented by the 100-day SMA. At 45.43, the Relative Strength Index (14) remains slightly below neutral, signalling weak bullish momentum. This supports the view that the rebound is corrective within a wider declining phase, rather than the start of a trend reversal.

The lower Bollinger band, near 109.20, provides the first downside support, ahead of the 15 October low at 108.64. Should prices break decisively beneath that floor, the decline could extend towards 107.69, the low recorded on 13 February.

Immediate resistance sits in the 111.00-111.10 area, encompassing the psychological level and the upper Bollinger band. Closing above the latter on a daily basis could clear a path towards the 100-day SMA at 112.05. Further hurdles would then be the 16 June high of 113.55 and the 27 July high of 114.67. 

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