AUD/JPY Holds Below 112.00 on Diverging Central Banks

Key Moments

Cross Under Pressure Amid Central Bank Divergence

AUD/JPY remains on the back foot near 111.95 in early European trade on Wednesday, with the pair holding in negative territory. The cross continues to face selling interest as the broader tone stays weak, although the neutral configuration of the Relative Strength Index (RSI) suggests that additional sideways consolidation is possible.

The initial resistance level is identified at 112.05, while the first notable support zone is highlighted at the 100.00 psychological handle.

BoJ Hike and Policy Signals Weigh on Yen

The Japanese Yen (JPY) has come under pressure against the Australian Dollar (AUD) following last week’s policy move by the Bank of Japan (BoJ). The central bank increased its policy rate by 25 basis points to 1.25%, its highest level since 1995, in a widely anticipated step. The decision was not unanimous, however, with a 7-2 vote as board members Toichiro Asada and Ayano Sato dissented.

Market participants interpret the dissent from the two policymakers as a sign that further rate increases could prove challenging to deliver, limiting the scope for additional tightening and undermining support for the JPY.

According to Bloomberg, investors are assigning roughly a 30% probability that the BoJ will raise its benchmark short-term rate to 1.50% in October.

RBA Expectations Support the Australian Dollar

On the Australian side, comments from Reserve Bank of Australia (RBA) Governor Michele Bullock on Tuesday have drawn attention. Bullock noted that supply shocks are difficult for monetary policy to manage and emphasized that policy must address the second-round impacts of such shocks on inflation.

Bloomberg Economics indicated that the RBA is expected to increase its key interest rate at the September 28-29 policy meeting as surging energy prices heighten upside risks to inflation, and also flagged the possibility of another hike in November.

Money markets, according to Bloomberg, are currently pricing in about a 90% chance that the RBA will deliver a quarter-percentage-point hike to 4.6% next week.

Intervention Watch: BoJ Rate Check Spurs Yen Rebound

Analysts at MUFG/BTMU pointed out that the Yen staged a rebound late on Friday following reports that the BoJ had conducted a rate check during the New York session, “sending a clear signal that they are prepared to intervene again if the Yen continues to weaken.” They argued that this development represented a notable shift in market sentiment, with the possibility of renewed official action helping to limit further JPY downside.

Technical Picture: Bearish Tone Below the 100-Day SMA

From a technical standpoint, AUD/JPY preserves a negative short-term structure on the daily chart while trading below both the middle line of the Bollinger Bands and the 100-day simple moving average (SMA). The spot price also remains comfortably under the upper Bollinger Band, indicating that the recent rebound is being constrained by multiple resistance layers. The 14-day RSI, hovering around 49, stays in neutral territory and points to an absence of strong directional momentum for now.

On the upside, the first technical barrier appears at the Bollinger middle band at 112.05. Above that, the 100-day moving average at 112.85 is the next key reference point. A sustained break through this area could open the door to the August 18 peak at 113.61, followed by the July 27 high at 114.67 and subsequently the upper Bollinger Band around 115.10.

On the downside, the 100.00 psychological mark stands out as a crucial support for the pair. Below there, the September 14 trough at 109.67 serves as the next level of interest, and a move under that low would bring the lower Bollinger Band at 109.00 into focus.