Key Moments
- AUD/JPY traded around 113.35 in early European hours on Monday, maintaining a positive tone above 113.00.
- Traders are positioning ahead of Tuesday’s policy decisions from the RBA and BoJ, with the RBA expected to keep rates steady and the BoJ seen raising its benchmark rate.
- Key technical levels include resistance at 113.60 and 114.92, with support at 112.25 and near 111.90.
Risk Appetite Supports AUD/JPY
AUD/JPY advanced toward 113.35 during the early European session on Monday, extending its gains and trading in positive territory. The move reflected firmer risk sentiment that lent support to the Australian Dollar (AUD) against the Japanese Yen (JPY), helping the cross sustain a constructive tone above the 113.00 handle.
Sentiment was aided by reports that the United States had agreed to a peace deal with Iran, underpinning demand for risk-sensitive assets. According to CNN, Washington and Tehran reached an agreement on Sunday that is set to take effect on Friday. US President Donald Trump said the US is lifting its naval blockade on Iranian ports and that the Strait of Hormuz will reopen after the agreement is signed.
With the pair holding gains, attention is turning to upcoming central bank decisions, which are likely to drive the next significant move in AUD/JPY.
Central Banks in Focus: RBA and BoJ
On Tuesday, the Reserve Bank of Australia (RBA) is anticipated to leave its key interest rate unchanged for the first time this year. Money markets have pared expectations for further tightening, and the press conference will be closely watched for guidance on the policy outlook.
Market participants will look for any indication from RBA Governor Michele Bullock on whether policymakers are comfortable with the current stance or if they intend to keep options open for additional action to address persistent price pressures. Easing expectations for further rate hikes from the Australian central bank could restrain upside potential for the Aussie in the near term.
The Bank of Japan (BoJ), by contrast, is seen moving in a tightening direction. The BoJ is likely to lift its benchmark interest rate to the highest level since 1995, despite the absence of its governor. A Reuters poll indicated that economists project the Japanese central bank to increase rates to 1.25% in the fourth quarter after a hike in June to 1.0%.
Technical Outlook: Bullish Bias with Scope for Consolidation
From a technical perspective, AUD/JPY maintains a constructive structure on the daily chart. The pair is holding above the 100-day simple moving average (SMA) and the lower Bollinger Band, signaling underlying demand on pullbacks. However, price remains just below the Bollinger middle band, while the Relative Strength Index (RSI) is hovering close to the neutral 50 mark, pointing to a consolidation phase within a broader uptrend.
| Level | Indicator / Reference | Zone |
|---|---|---|
| 114.92 | Upper Bollinger Band – next resistance | Resistance |
| 113.60 | Bollinger middle band – initial resistance | Resistance |
| 113.35 | Recent trading area in early European session | Spot area |
| 112.25 | Lower Bollinger Band – first support | Support |
| 111.90 | 100-day SMA cluster – key structural support | Support |
On the upside, the first significant barrier is aligned with the Bollinger middle band near 113.60. A sustained break above this area would expose the upper Bollinger Band around 114.92 as the next resistance zone if buyers reassert control.
On the downside, initial support is seen at the lower Bollinger Band around 112.25. Below that, the 100-day SMA clustered near 111.90 represents a critical level for the prevailing bullish configuration; a clear move under this region would undermine the positive structure and could pave the way for a deeper corrective decline.
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