AUD/JPY Pullback Tests Support as Tokyo Inflation Lifts Yen

Key Moments

AUD/JPY traded lower around 114.50 in early European dealings on Monday, despite holding above its 100-day simple moving average.
Stronger Tokyo core CPI for August and hawkish remarks from BoJ officials underpinned the Japanese Yen, with markets eyeing a potential policy rate move to 1.25%.
Key technical levels include downside support at 113.66 and resistance at 114.96, with the 14-day RSI at 63.27 signaling ongoing bullish momentum.

Cross Under Pressure as Yen Strengthens

The AUD/JPY cross traded in negative territory near 114.50 during the early European session on Monday, easing from recent levels but still maintaining a constructive technical backdrop. The move lower came as the Japanese Yen (JPY) gained ground against the Australian Dollar (AUD) following a further pickup in inflation in Japan’s capital.

Japan’s annual core Consumer Price Index (CPI) for Tokyo rose for a third straight month in August, reinforcing expectations that the Bank of Japan (BoJ) could proceed with an interest rate hike as early as September. The hotter inflation print followed earlier hawkish comments from BoJ Deputy Governor Ryozo Himino, who underscored rising inflation risks.

In the wake of these developments, most market participants currently anticipate that the Japanese central bank will lift its policy rate to 1.25% at its upcoming meeting, lending support to the Yen and weighing modestly on AUD/JPY in the near term.

China Data Offers Support to the Aussie

Providing a partial counterbalance to Yen strength, fresh economic data from China offered some backing to the Australian Dollar, which is often viewed as a proxy for Chinese growth given the close trade relationship between the two economies.

Figures released by the National Bureau of Statistics (NBS) on Monday showed that China’s Manufacturing Purchasing Managers’ Index (PMI) climbed to 49.8 in August from 49.2 in July, exceeding expectations of 49.7. The NBS Non-Manufacturing PMI held steady at 49.0 in August, unchanged from July’s 49.0 reading.

BoJ Outlook: Hawkish Bias Intact

Analysts at Societe Generale highlighted that the latest pattern in Japanese inflation – characterized by softer non-fresh food prices alongside firmer services costs –
“continue to support the BoJ’s hawkish path,” reinforcing expectations that the central bank will maintain its tightening bias despite temporary downward pressure from renewed energy subsidies.

Technical Overview: Bullish Structure Above 100-Day SMA

From a technical perspective, AUD/JPY continues to display a bullish near-term tone on the daily chart. The pair remains above the 100-day simple moving average (SMA) and the middle line of the Bollinger Bands, indicating that the broader uptrend is still in place even as prices consolidate.

Spot action is trading within the upper half of the Bollinger envelope, with the upper band serving as immediate overhead supply. The 14-day Relative Strength Index (RSI) stands at 63.27, firmly in positive territory and pointing to ongoing buying interest rather than clear overbought conditions.

Key Technical Levels for AUD/JPY

Market participants are closely monitoring the following levels on the daily chart:

Type	Level	Description
Support 1	113.66	August 26 low, initial demand zone
Support 2	113.25	100-day SMA
Support 3	113.00	Bollinger middle band
Resistance 1	114.96	August 26 high, immediate resistance
Resistance 2	115.20	Bollinger upper band
Resistance 3	116.00	Psychological barrier

On the downside, the first notable support is located at the August 26 low of 113.66. Below that, the 100-day SMA at 113.25 is the next key contention area, followed by the Bollinger middle band at 113.00, which could act as additional support if selling pressure intensifies.

On the topside, a sustained move above the August 26 high of 114.96 would expose the Bollinger upper band at 115.20. A break beyond that level would put focus on the 116.00 psychological threshold as the next resistance to watch.