FX.co ★ Wiking | AUD/JPY

The AUD/JPY currency pair is trading bullishly at 110.75 in the early hours of the European session on Tuesday. Hawkish sentiment from the Reserve Bank of Australia (RBA) is strengthening the Australian Dollar (AUD) against the Japanese Yen (JPY). Australia's September inflation data will be the main focus on Wednesday. The BoJ interest rate decision will be the key focus on Friday. Sarah Hunter, the RBA Assistant Governor, told the audience that the RBA was "not quite yet" finished with the fight against inflation, suggesting more rate hikes were imminent at the policymakers' meeting in early next month. The ASX RBA Rate Tracker shows a 62% chance of another interest rate hike to 4.85% by the next RBA Board meeting. Traders are looking to Australian CPI data for a new direction. Year-over-year CPI is forecast to rise to 4.2% in September, and month-over-month CPI is forecast to rise to 0.7% in September. Higher inflation in Australia may give the Aussie dollar a short-term boost if it signals stronger inflation there. The BoJ is expected to leave interest rates unchanged at 1.25% at its October policy meeting on Friday. Experts said the Japanese central bank is unlikely to give clear hints on when and how quickly rates would rise. According to analysts at Brown Brothers Harriman, the BoJ is "expected to leave rates on hold at 1.25% and review its September 25bps rate increase prior to raising rates again." The analysts point to cautionary comments from BoJ Governor Kazuo Ueda in September, when he said "too much haste in rate increases could destabilize asset prices" and added that "it may take some time to be convinced that 2% is a steady inflation." Nevertheless, BBH expects that "stronger core inflation gives leeway for a hawkish Outlook report, thereby increasing BoJ rate hike expectations in favor of JPY." As an indication of the new market outlook, BBH notes that "swaps price in 75% chance of a 25bps BoJ rate hike to 1.50% in December 18 and about 75bps of rate tightening over the coming 12 months." Rating of BoJ's Himino speech: 8.2/10 on FXS Speechtracker, just at the historical average, but with an emphasis on rising underlying inflation and inflation expectations, making the speech hawkish. Increased AI-related demand driving capex and exports, along with accommodative monetary policy, low real interest rates, and a fast pace of bank lending, strengthens the notion that inflation moves toward the 2% target, hence strengthening the Yen. References to delaying policy changes increasing the risk of price increases indicate a greater willingness to change policy, even as it remains independent. The effort to stabilize prices through "appropriate monetary policy" needed for sustained economic growth shows that the BoJ is moving away from ultra-easy policy and will contain any Yen weakness.

On the daily chart, the overall tone for AUD/JPY is capped, as price remains below the 100-day SMA. However, price has moved back above the 20-period middle band of the Bollinger Bands, with the RSI (14) at 52.25 indicating slightly positive momentum, though it has yet to break the established bearish trend from the SMA overhead. Support for the downtrend appears at the Bollinger middle band at 110.20, followed by the 110.00 psychological level. Further support is at the lower end of the the Bollinger Band at 109.20, where sellers may hesitate before continuing their downward move. Resistance on the upside is at the upper end of the Bollinger Band at 111.20, heading toward the 100-day SMA at 112.00. Above this level, a move can be expected to reach the high of 113.61 reached on August 18.