Near 110.00: AUD/JPY weakens as price forecast remains bearish below 100-day SMA

• 110.10 is the level in focus as AUD/JPY eases in early European trading on Friday.
• With Japan’s CPI inflation above the BoJ’s 2% target for the first time this year, the argument for a near-term rate increase has strengthened.
• Below the 100-day SMA, the cross retains a bearish bias.
• 109.20 marks the initial downside target, while the 111.00-111.10 area provides immediate resistance.

110.10 is where AUD/JPY trades on the back foot early in Friday’s European session. The Japanese Yen (JPY) has gained slightly against the Australian Dollar (AUD). Japan’s National Consumer Price Index (CPI) inflation has moved above the Bank of Japan’s (BoJ) target for the first time in nine months, reinforcing the case for a widely anticipated December interest rate increase.

Figures released on Friday by the Statistics Bureau of Japan put September’s annual National CPI increase at 2.1%, up from 1.9% in August. Core CPI also advanced 2.1% YoY in September, following a 1.8% increase in August and matching consensus expectations. This measure excludes volatile fresh food prices but retains fuel costs.

Excluding both fresh food and energy, CPI increased 2.4% year on year in September, compared with 2.0% in August. The BOJ closely monitors this measure as a better indicator of demand-led price pressures.

A Reuters poll shows most economists anticipate unchanged rates next week, with a quarter-point increase expected at the subsequent meeting in December.

1.25% BoJ hold expected; hawkish tone sustains next-hike debate

A neutral stance remains some way off, according to Standard Chartered analysts, who expect the BoJ to “keep the policy rate unchanged at 1.25% at its 29-30 October meeting, following September’s 25bps hike,”. Their assessment is that “we expect policy makers to maintain a clearly hawkish tone,” as “the debate is increasingly shifting from whether the BoJ will hike again to when the next hike will occur.” On timing, they say “while December is now a live meeting, January 2027 remains our base case for the next hike.” Standard Chartered also contends that “the BoJ has an incentive to continue policy normalisation to support yield differentials and reduce the risk of renewed JPY weakness, particularly if the Fed resumes tightening or maintains a restrictive policy stance for longer than expected.”

BoJ’s Himino highlights AI-led capex and inflation risks, signalling a more hawkish Yen outlook

An FXS Speechtracker score of 8.2/10 places BoJ’s Himino exactly at the historic average. The tone is nevertheless distinctly more hawkish, with underlying inflation approaching the 2% target and inflation expectations still climbing. Robust AI-related demand is boosting capital expenditure and exports. Alongside low real interest rates and fast bank lending growth, this suggests accommodative conditions are becoming less consistent with the upside inflation risks identified in the speech.

Delaying policy adjustments could create inflation risks and harm the economy, the warning suggests. That strengthens the tilt towards earlier normalisation and supports the Yen over the medium term. The emphasis on appropriate monetary policy delivering price stability and improving Japan’s sustainable growth points to BoJ tolerance for tighter conditions ahead. Near-term decisions, however, remain dependent on incoming data.

Technical Assessment: 100-day SMA caps AUD/JPY as bearish outlook persists

Trading below the middle Bollinger band and well beneath the 100-day simple moving average (SMA), AUD/JPY retains a near-term bearish bias on the daily chart. Additional overhead supply at the upper Bollinger band suggests rebounds are likely to run out of room before testing the medium-term trend line represented by the 100-day SMA. At 45.43, the Relative Strength Index (14) is slightly below neutral. It signals limited bullish momentum, supporting the view that the rebound is corrective within a broader downward phase rather than a trend reversal.

Around 109.20, the lower Bollinger band offers the first support, ahead of the 15 October low at 108.64. A clear break beneath that floor would leave scope for a deeper decline towards 107.69, the 13 February low.

The 111.00-111.10 area is the first resistance zone, combining the psychological level with the upper Bollinger band. A daily close above the latter could clear a path towards the 100-day SMA at 112.05. Beyond that lie the 16 June high of 113.55 and the 27 July high of 114.67. 

(The technical analysis of this story was written with the help of an AI tool. Know more.)