AUD/JPY Advances as Inflation Data Boosts RBA Hike Bets

Key Moments

Rally Driven by Australian Inflation and RBA Expectations

AUD/JPY is trading firmly in positive territory around 114.45 in early European hours on Thursday, as the Australian Dollar outperforms the Japanese Yen. The move follows hotter-than-anticipated Australian Consumer Price Index data, which has strengthened expectations that the Reserve Bank of Australia will deliver another rate increase.

Market participants are reassessing the likelihood of a fourth interest rate hike by the RBA this year. According to Reuters, the probability of a move in September has risen to 38%, compared with 17% previously, and markets are now fully pricing in a rate hike by February next year.

Figures from the Australian Bureau of Statistics released on Wednesday showed that monthly CPI rose 1.0% in July, reversing a 0.1% fall in June and surpassing projections for a 0.8% gain.

BoJ Stance, Intervention Concerns, and Yen Dynamics

On the Japanese side, Bank of Japan Deputy Governor Ryozo Himino on Thursday highlighted the importance of timely interest rate adjustments in light of rising inflation risks and noted that market expectations are centered on a near-term increase in borrowing costs. However, he avoided offering specific guidance on the exact timing of any next move, stating only that “in-depth deliberations” on price pressures should occur at each policy meeting.

Japan-related intervention risks and prospects of further BoJ tightening remain key elements supporting the Yen. Rabobank’s FX strategists emphasize that Japan’s policy configuration continues to be critical for the currency’s outlook. They observe that “if the BoJ does hike rates, the MoF may repeat its July strategy of fanning the market move with more intervention,” thereby amplifying the effect of any policy change. In their assessment, “fear of further FX intervention in support of the JPY coupled with the prospect of a BoJ September rate hike and the softer USD suggests scope for USD/JPY to trade in the 158-157 area on a 3-to-6-month view.”

Technical Picture: AUD/JPY Retains Bullish Bias

From a technical standpoint, the AUD/JPY cross continues to extend gains on the daily chart, holding above the 100-day Simple Moving Average and the 20-day Bollinger middle band. This configuration underpins a positive near-term outlook. Price action is edging closer to the upper Bollinger Band, while the 14-period Relative Strength Index stands at 64.33, signaling sustained upward momentum as conditions approach overbought territory.

On the upside, the first resistance is seen near the upper Bollinger Band at approximately 115.00, where emerging supply may temper further gains. A sustained break above this zone could open the path toward 115.50.

On the downside, the initial level to watch is the August 24 low at 113.60, followed by the 100-day Simple Moving Average at 113.20. A clear move below that moving average would bring the 20-day Bollinger middle band near 112.55 into view. If selling pressure intensifies and a broader corrective phase develops, the lower Bollinger Band around 110.15 is identified as a more substantial support area.