AUD/JPY Climbs, But BoJ Rate Hike Expectations Limit Upside

Key Moments

AUD/JPY traded near 110.90 in Wednesday’s early European session, extending gains above 110.50.
Market expectations for a Bank of Japan rate increase to 1.50% in December are seen capping upside below the 100-day SMA.
Technical bias remains bearish while the pair trades under the 100-day SMA around 112.10, with first support at 110.20 and resistance at 111.00.

Broad Market Context

AUD/JPY was trading in positive territory around 110.90 during early European hours on Wednesday, consolidating recent strength above 110.50. Despite the advance, further appreciation appears constrained as investors respond to increasingly hawkish signals from Japanese policymakers.

The cross has been unable to reclaim its 100-day simple moving average (SMA), leaving the broader tone tilted to the downside even as near-term price action shows some stabilization.

BoJ Officials Signal Confidence on Inflation Outlook

On Wednesday, Bank of Japan (BoJ) Deputy Governor Ryozo Himino stated that underlying inflation is almost at the central bank’s 2% objective, while noting that financial conditions remain accommodative.

Earlier in the week, BoJ Governor Kazuo Ueda remarked that underlying inflation is near the 2% target. He also said that if the central bank lifts the short-term policy rate, long-term yields are likely to rise steadily alongside that policy shift. In comments last week, board member Junko Koeda argued that the BoJ should not be excessively cautious about further tightening, with rates currently at their highest in 31 years and inflation risks skewed to the upside.

A Reuters poll showed that most economists expect the BoJ to raise its policy rate in December to 1.50%, following previous moves in June and September. These expectations are helping to support the Japanese Yen and are seen limiting upside in AUD/JPY.

Danske Bank View: December Hike Risk in Focus

Analysts at Danske Bank point to a more assured tone from Governor Ueda, who now views underlying inflation as “quite close” to the 2% target. They highlight tight labor markets and robust global AI demand as drivers of price pressures. Danske Bank also underscores Ueda’s warning that “failing to raise rates at an appropriate pace could push long-term bond yields higher,” noting the risk of falling behind the inflation curve.

Danske Bank notes that, heading into the next BoJ meeting, which concludes on 30 October 2026, markets expect the policy rate to remain at 1.25%. However, investors are expected to focus heavily on any guidance that keeps “a hike to 1.5% as early as December on the table.”

Ueda’s Tone: Mild Hawkish Bias with Cautious Execution

According to FXS Speechtracker, Ueda’s latest remarks earned a score of 7/10, slightly below his 7.4/10 average. Still, the emphasis on “underlying inflation near 2%” and on a constructive wages–prices dynamic suggests a marginally hawkish shift.

Ueda points to demand-driven inflation supported by strong global activity, domestic capital expenditure and exports, as well as tight labor conditions. At the same time, he cautions that a policy error could push long-term Japanese government bond yields higher, reinforcing the importance of anchoring core inflation close to 2%.

Ueda also reiterates that there is no change in the basic approach to bond tapering and declines to precommit to emergency bond operations. This reflects a data-dependent stance. He indicates that well-calibrated rate hikes would allow long-term yields to rise “steadily” while keeping financial conditions accommodative, implying a gradual normalization path that is mildly supportive for the Yen as markets continue to price a slow retreat from ultra-easy policy settings.

Technical Picture: Bearish Bias Persists Below 100-Day SMA

On the daily chart, AUD/JPY maintains a bearish short-term bias while trading beneath the 100-day SMA. Price action remains above the middle Bollinger band, which aligns with the 20-day SMA, hinting at some short-term stabilization. The 14-period Relative Strength Index (RSI) stands at 52.30, indicating neutral to slightly positive momentum rather than oversold conditions.

Level	Type	Description
112.10	Resistance	100-day SMA – key bearish pivot where stronger selling interest is expected
111.25	Resistance	Upper Bollinger band
111.00	Resistance	Psychological level and first upside hurdle
110.20	Support	Bollinger middle band / 20-day SMA – initial downside support
109.34	Support	October 16 low
109.15	Support	Lower Bollinger band

On the upside, the pair first faces resistance at the 111.00 psychological mark, followed by the upper Bollinger band near 111.25. A more important ceiling is located at the 100-day SMA around 112.10, where rallies are expected to encounter stronger supply.

On the downside, initial support is identified at the Bollinger middle band at 110.20. If bearish momentum strengthens, sellers could aim for the October 16 low at 109.34, with further weakness exposing the lower Bollinger boundary around 109.15.