Above 110.50: AUD/JPY Price Forecast shows gains intact, but outlook remains bearish below 100-day SMA

• 110.75 is in focus as AUD/JPY draws buying interest in early European trading on Tuesday.
• Below the 100-day SMA, the cross retains a bearish bias, although firmer RSI momentum leaves room for a short-lived recovery.
• 110.20 marks initial support, while 111.20 is the nearest resistance to monitor.

110.75 is the level around which AUD/JPY trades higher early in Tuesday’s European session. The Australian Dollar (AUD) draws some support against the Japanese Yen (JPY) from the Reserve Bank of Australia’s (RBA) hawkish stance. Attention turns to Australia’s September inflation figures later on Wednesday, followed by the Bank of Japan’s (BoJ) interest rate decision on Friday.

Further rate increases look likely at the policy meeting early next month after RBA Assistant Governor Sarah Hunter said the central bank was “not quite yet” finished fighting inflation. According to the ASX RBA Rate Tracker, markets now assign nearly a 62% probability to a rate increase to 4.85% at the next RBA Board meeting.

Australia’s Consumer Price Index (CPI) report is the next potential catalyst for traders. For September, economists forecast annual CPI growth of 4.2% and a monthly increase of 0.7%. Evidence of stronger Australian inflation could provide a near-term lift to the Aussie.

A steady interest rate of 1.25% is expected from the BoJ at Friday’s October policy meeting. Analysts said the central bank would probably refrain from giving clear signals on the timing and pace of subsequent rate increases. It must balance the need to prevent inflation from overshooting against the risk that a premature hike could unsettle already nervous markets.

75% December hike odds put BoJ rate path and Yen support in focus

September’s policy tightening remains central to the BoJ outlook. Analysts at Brown Brothers Harriman say the bank is “widely expected to keep rates on hold at 1.25% and assess September’s 25bps hike before tightening again.” They cite Governor Kazuo Ueda’s caution 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.”

Despite that caution, BBH maintains that “firmer underlying inflation leaves scope for a more hawkish Outlook Report, lifting BoJ rate expectations in favor of JPY.” The analysts highlight the change in market pricing, noting 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.”

8.2/10 for BoJ’s Himino as AI inflation risks underpin Yen

An 8.2/10 reading on FXS Speechtracker puts BoJ’s Himino exactly at the historical average. Nevertheless, the focus on increasing underlying inflation and inflation expectations signals a hawkish tilt. Robust AI-related demand is boosting capital expenditure and exports. Alongside supportive 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.

Greater readiness to adjust policy is evident in warnings that delaying changes could increase upside inflation risks and harm the economy, although the timing still depends on incoming data. The emphasis on price stability through “suitable monetary policy” to ensure sustainable growth points to a gradual retreat from ultra-loose settings. That backdrop should constrain Yen losses and keep markets watchful for further policy normalisation.

100-Day SMA Caps AUD/JPY: Technical Outlook Stays Negative

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

Around 110.20, the Bollinger middle band provides the first downside support, ahead of the psychological 110.00 mark. Further below, the lower Bollinger band near 109.20 offers another cushion, where sellers may pause should the cross resume falling.

Near 111.20, the upper Bollinger band presents the first resistance, followed by the 100-day SMA at 112.00. A sustained move above the latter could open the way for a rally towards 113.61, the high recorded on 18 August.

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