AUD/JPY Advances to 111.00 as Downside Risks Persist

Key Moments

Risk Sentiment and BoJ Expectations Support AUD/JPY

AUD/JPY is trading higher near 110.90 in Thursday’s early European session, extending gains as the Japanese Yen (JPY) comes under pressure against the Australian Dollar (AUD). Rising energy prices linked to the ongoing conflict in the Middle East are weighing on the Yen, given Japan’s reliance on imported oil.

Market participants are focused on the upcoming Bank of Japan (BoJ) monetary policy decision on Friday. The central bank is widely viewed as likely to raise its policy rate to 1.25% from 1.0% at the September meeting. Investors are also awaiting remarks from BoJ Governor Kazuo Ueda, looking for clues on how quickly and how far the BoJ may proceed with additional rate increases.

“Markets are divided between those who see hawkish BOJ communication as helping lower bond yields by alleviating concern it is behind the curve on inflation, and others who see it as lifting yields by moving up terminal-rate bets,” said Katsutoshi Inadome, senior strategist at Sumitomo Mitsui Trust Asset Management.

Standard Chartered View on BoJ Policy Path

Analysts at Standard Chartered anticipate that the BoJ will “raise the policy rate by 25bps to 1.25% at its 17-18 September meeting, while avoiding an overly hawkish message.” They argue that the prevailing macroeconomic setting provides the BoJ with scope to tighten modestly, stating that “the economy appears able to absorb another modest hike: Q2 GDP growth was revised up, exports remain robust, investment indicators are resilient, and real wages are rising.”

Technical Outlook: Bearish Bias Persists Below the 100-Day SMA

From a technical perspective, AUD/JPY maintains a negative near-term structure on the daily chart. The pair is trading below both the 20-day Bollinger simple moving average and the 100-day moving average, underscoring a prevailing bearish tone. Price action is currently positioned closer to the lower Bollinger band than to the upper band.

The Relative Strength Index (14) stands at 38.58, remaining under the neutral 50 threshold. This configuration points to continued downside pressure rather than signaling that the cross is immediately oversold and primed for a sharp rebound.

Key Technical Levels

On the upside, the first resistance level is located at 111.63, the low from August 10. A move above this zone would expose the 20-day Bollinger middle band around 112.45, followed by the 100-day moving average near 112.90. If bullish momentum extends further, the upper Bollinger band in the vicinity of 115.85 would come into view as a more distant ceiling.

On the downside, the 100.00 psychological area stands out as a critical support. A clear break below this threshold could trigger a decline toward the lower Bollinger band at 109.05. Sustained selling beyond that level would shift focus to the March 31 low at 108.79, then the February 16 low at 107.73.