AUD/JPY Weakens below 111.00, remains capped below 100-day SMA

• AUD/JPY weakens to near 110.75 in Tuesday’s early European session. 
• The cross keeps a negative tone under the 100-day SMA, with bearish RSI momentum. 
• The first upside barrier emerges at  111.63; the initial support level is located at 110.00. 

The AUD/JPY cross trades in negative territory around 110.75 during the early European trading hours on Tuesday. A slew of hawkish comments from the Bank of Japan (BoJ) policymakers have cemented views that the BoJ will raise interest rates this month, supporting the Japanese Yen (JPY) against the Australian Dollar (AUD). 

BoJ board member Hajime Takata said last week that the central bank could take a more aggressive approach than expected. He said a 25-basis-point hike “is not necessarily set in stone,” and that generally speaking, back-to-back rate hikes would be a possibility, too.

The Japanese central bank is expected to raise its benchmark interest rate by 25 basis points (bps) to 1.25% at its upcoming policy meeting on September 17–18. 

BoJ hawkish signals keep Yen bulls on the front foot

Analysts at MUFG highlight that the recent shift in tone from the BoJ was underscored by policy board member Hajime Takata, who told local business leaders on 2 September that the Bank needed to “conduct rate hikes nimbly” and should not be “bound by particular intervals or ranges anticipated in the markets.” MUFG notes that, even though Takata subsequently pushed back against the prospect of a larger move at the upcoming meeting, his remarks have nevertheless encouraged investors to contemplate not only a faster pace of tightening but also the possibility of “larger individual moves” from the BoJ.

Technical Analysis: AUD/JPY remains bearish below the key 100-day SMA

In the daily chart, AUD/JPY remains under a dense band of resistance, with price lodged below the 100-day simple moving average (SMA) and even the Bollinger Bands’ (20, 2) lower band, reinforcing a capped, bearish near-term tone. The Relative Strength Index (14) at 32.65 hovers just above oversold territory, suggesting downside momentum is still dominant but increasingly stretched.

On the topside, the immediate resistance level emerges at the August 10 low of 111.63. The key hurdle to watch is in the 113.15-113.25 zone, representing the the 100-day SMA and the Bollinger midline. Beyond that, the upper Bollinger band at roughly 115.35 marks a more distant barrier.

On the flip slide, the 110.00 psychological level acts as an initial support level for the cross. Further south, the next downside target to watch is the August 3 low of 109.24.  

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