AUD/JPY Tops 110.80 Ahead of Key RBA Interest Rate Call

Key Moments

Rally in AUD/JPY Ahead of Expected RBA Hike

AUD/JPY moved higher to around 110.85 during the early European session on Monday, reversing a four-session decline and trading in positive territory. The Australian Dollar gained ground against the US Dollar as persistent inflation supported expectations for a more hawkish stance from the Reserve Bank of Australia (RBA).

Market consensus pointed to a 25 basis point increase in the Official Cash Rate, from 4.35% to 4.60%, at the conclusion of the RBA meeting on Tuesday. Such a move would represent the fourth rate hike in 2026 and take borrowing costs to their highest level since 2011.

“The ongoing escalation of the conflict in the Middle East and the tendency of the RBA to view the resultant increase in oil prices as much more of an inflation shock than a growth shock… makes us view two rate hikes (September and November) as more likely than one,” said ANZ analysts last week.

Focus on Australian Inflation and Policy Outlook

Investor attention was also set to turn to Australia’s August Consumer Price Index data scheduled for release on Wednesday. The headline CPI was expected to come in at 4.1%. A stronger-than-anticipated inflation print could provide additional support for the Australian Dollar against the Japanese Yen in the near term.

Economists at ING expected the RBA to “deliver a decisive 25bp rate hike on Tuesday,” arguing that the decision reflects “an economy that continues to run hot across multiple fronts.” They noted that “labour market conditions remain tight, second-quarter GDP growth surprised to the upside, and recent inflation readings came in stronger than expected,” underpinning the case for further tightening. ING also flagged incoming price data, stating that “August CPI data is likely to accelerate further to 4.1% year-on-year, driven primarily by higher diesel and food prices, alongside persistent underlying core inflation pressures.”

Japanese Authorities Monitor FX as Yen Weakness Persists

Traders remained alert to the risk of foreign-exchange intervention from Japanese authorities, a factor that could limit further downside in the Yen. According to the article, Japan’s Prime Minister Takaichi Sanae said on Friday that US President Donald Trump expressed concern about the Yen’s weakness during their latest summit.

Meanwhile, Japanese Finance Minister Katayama Satsuki reiterated concerns after speaking with US Treasury Secretary Scott Bessent by phone, stating that “the yen’s undervaluation is problematic.”

Technical Picture: Bearish Tone Intact Below Key Averages

From a technical standpoint, AUD/JPY maintained a negative short-term structure on the daily chart, with the pair trading below both the 100-day simple moving average and the middle line of the Bollinger Bands. Spot prices were positioned closer to the lower band of the Bollinger envelope, while the Relative Strength Index stayed under the 50 mark at 41.58, signaling weak but not oversold downside momentum.

On the upside, the first resistance level appeared at the Bollinger middle band near 111.45, followed by the September 22 peak at 112.22 and the 100-day simple moving average around 112.80. A decisive move through that region could open the door to the upper Bollinger boundary close to 113.70.

On the downside, the article identified the 100.00 area as a key psychological support. Below that, the lower Bollinger band at 109.25 was seen as the next important floor, where bearish pressure might begin to abate if tested.