AUD/JPY Extends Fall as Bearish Technicals Take Hold

Key Moments

Fundamental Drivers: Australia and Japan

The AUD/JPY cross is trading weaker around 109.70 during the early European session on Monday, reflecting a softer Australian Dollar (AUD) against the Japanese Yen (JPY). The shift comes as market participants scale back expectations that the Reserve Bank of Australia (RBA) will raise interest rates in November, after the latest Consumer Price Index (CPI) reading matched forecasts.

According to data from LSEG, money markets now see the RBA keeping rates unchanged at its November meeting, with the implied probability of a hike dropping to around 20%.

In Japan, Chief Cabinet Secretary Minoru Kihara stated on Monday that authorities have no plans for an additional release of crude oil from national reserves. He noted that Japan had already drawn on its crude supplies, despite a Group of Seven agreement to release 100 million barrels of diesel and crude from emergency reserves.

Former Bank of Japan (BoJ) board member Asahi Noguchi commented on the domestic inflation backdrop, saying: “Underlying inflation is near the BOJ’s 2% target, and wages are becoming embedded at levels consistent with 2% inflation. If so, it would be too risky to implement policies that boost demand.”

Focus on BoJ Communication and Wage Data

Analysts at MUFG/BTMU point to upcoming developments in Japan as central to the BoJ policy outlook. They note that “BOJ Governor Ueda’s speech and wage data will be important for assessing the timing of the BOJ’s next move.”

The analysts indicate that “headline labour cash earnings growth is expected to slow to 3.7% from 4.3% as summer bonuses normalise,” while stressing that “underlying base-pay momentum is likely to remain firm, keeping the prospect of further monetary tightening alive.”

MUFG/BTMU further highlight that “Governor Kazuo Ueda’s speech on 6 October will provide an additional policy signal, while household spending and current-account data are also due,” underlining the relevance of these releases and communications for shaping expectations on the BoJ’s future policy steps.

Technical Picture: Bearish Bias Persists Below Key Averages

From a technical standpoint, AUD/JPY retains a negative short-term structure on the daily chart. The pair continues to trade below both the 20-day simple moving average (SMA) – which coincides with the Bollinger middle band – and the 100-day SMA, signaling sustained downside bias. Price action also remains under the Bollinger upper band, indicating that upside attempts are constrained following the latest pullback.

The Relative Strength Index (RSI) stands at 34.97, hovering just above oversold territory. This configuration suggests that while bearish momentum still dominates, the move lower is becoming somewhat stretched.

Key Technical Levels

The immediate resistance and support zones for AUD/JPY can be summarized as follows:

On the upside, the first notable barrier is located at the Bollinger middle band around 110.65. Above that, the Bollinger upper band at 112.20 and the 100-day SMA at 112.56 combine to form a broader resistance area that could cap rallies.

On the downside, initial support appears near the Bollinger lower band around 109.08. A decisive move below this threshold would likely clear the way for additional weakness in the cross in the coming sessions. The initial support level within the broader technical framework is seen at 109.20, while the first upside barrier is identified at 100.00.