111.00 area: AUD/JPY holds gains, but price outlook remains bearish below 100-day SMA

AUD/JPY trades near 110.90. The cross remains in positive territory in early Asian trading on Monday.
Below the 100-day SMA, the cross retains a bearish bias.
111.45 marks the first resistance level, while 110.50 provides initial support.

AUD/JPY is trading around 110.90. The cross is in positive territory in Monday’s early European session, with rising expectations of an imminent RBA interest rate increase lending some support to the Australian Dollar (AUD) against the Japanese Yen (JPY). Attention now turns to the Reserve Bank of Australia (RBA) policy meeting later on Tuesday.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

A fifth increase in the Official Cash Rate (OCR) this year is expected from the RBA. Almost every economist polled by Bloomberg expects the nine-member board to deliver a 25 basis points (bps) rise tomorrow. That would take the OCR to 4.85%, its highest in 18 years.

The prospect of currency intervention by Japanese authorities keeps traders on alert. Any such action might support the JPY and limit gains in AUD/JPY. Speaking on Monday, Japan’s Finance Minister Satsuki Katayama said the joint FX statement with the US remains in place and the government will counter disorderly moves. She also stressed the importance of stable foreign exchange markets and the need for the government to prevent chaotic fluctuations.

Q4 Inflation Risks: TD Securities Expects RBA Hike Followed by Hold

TD Securities sees upside inflation risks shaping the RBA outlook, stating that “the risks to inflation are tilted to the upside in Q4,” which it considers “likely to encourage markets to price in some chance of a follow-up hike in Q1 of 2027.” Its central forecast, however, is for a pause following next week’s expected increase: “after next week's anticipated hike, we forecast the Bank moving to the sidelines to assess the impact of the series of rate hikes to date.” Explaining that view, TD Securities says “the lags in policy and signs of slowing economic activity should keep the Bank on hold in 2027 with cuts to commence in 2028.” Its strategists also note that “the Monetary policy bias table below is not too different from what we presented ahead of the September RBA meeting,” adding that “this time we expect” persistent upside inflation risks to reinforce the RBA’s hawkish rhetoric, even as policy moves towards an extended hold.

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

Despite the recent rebound, the daily chart shows AUD/JPY remaining below its 100-day simple moving average (SMA), leaving the tone mildly bearish and gains constrained. Within the Bollinger Bands, the cross is consolidating above the middle band, with selling pressure still evident near the upper band. At around 52, the Relative Strength Index (RSI) points to neutral to slightly improving momentum, but this has not yet overcome the prevailing structural resistance.

The upper Bollinger band near 111.45 provides the first resistance, ahead of the 100-day SMA at 111.95. Restoring a bullish short-term bias would require a daily close above the latter level. The next obstacle would then be the 18 August high of 113.61.

Support first comes into view at the middle Bollinger band around 110.50, with the psychological 110.00 level below. Further support lies at 109.50, the lower Bollinger band. A break beneath that boundary would open the way for a more pronounced continuation of the bearish trend.

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

Japanese Yen: Key Questions Answered

Japanese Yen: Main Market Drivers

Among the most actively traded currencies globally, the Japanese Yen (JPY) takes its broad direction from Japan’s economic performance. More specific influences include Bank of Japan policy, the gap between Japanese and US bond yields, and traders’ appetite for risk, alongside other factors.

Bank of Japan Policy and the Yen

Currency control forms part of the Bank of Japan’s mandate, making its actions important for the Yen. On occasion, the BoJ has intervened directly in foreign exchange markets, usually to weaken the currency. Political concerns among Japan’s main trading partners nevertheless discourage frequent intervention. From 2013 to 2024, the BoJ’s ultra-loose monetary policy weakened the Yen against its major peers as the policy gap with other leading central banks widened. The gradual withdrawal of that ultra-loose stance has more recently offered the Yen some support.

US–Japan Bond Yield Gap and the Yen

By maintaining ultra-loose monetary policy over the past decade, the BoJ increasingly diverged from other central banks, notably the US Federal Reserve. This helped widen the yield gap between 10-year US and Japanese bonds, favouring the US Dollar over the Japanese Yen. That gap is now narrowing as the BoJ’s 2024 decision to begin gradually withdrawing ultra-loose policy coincides with interest rate cuts by other major central banks.

Risk Sentiment and the Yen’s Safe-Haven Role

Market turbulence tends to draw investors towards the Japanese Yen, which is widely regarded as a safe-haven investment. Its perceived stability and reliability make investors more likely to allocate funds to the currency during periods of stress. As a result, the Yen is likely to appreciate against currencies viewed as riskier investments when markets become unsettled.