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- AUD/JPY gathers strength to near 113.35 in Monday’s early European session.
- RBA is anticipated to leave the interest rate unchanged, while BoJ is set to raise its benchmark rate on Tuesday.
- The cross keeps the bullish vibe, but further consolidation cannot be ruled out with neutral RSI momentum.
- The first upside barrier emerges at 113.60; the initial support level to watch is 112.25.
The AUD/JPY cross trades in positive territory around 113.35 during the early European session on Monday. The reports that the United States (US) had agreed to a peace deal with Iran provide some support to the riskier assets, such as the Australian Dollar (AUD) against the Japanese Yen (JPY). All eyes will be on the Reserve Bank of Australia (RBA) and Bank of Japan (BoJ) interest rate decisions later on Tuesday.
CNN reported on Sunday that Washington and Tehran have reached an agreement that will take effect on Friday. US President Donald Trump said the US is lifting its naval blockade on Iranian ports and that the Strait of Hormuz will reopen after the agreement is signed.
On Tuesday, the RBA is expected to keep its key interest rate unchanged for the first time this year, with money markets paring bets on further tightening. Traders will take more cues from the press conference on whether RBA Governor Michele Bullock signals some comfort at the current rate or keeps the door open to further moves to counter stubborn price pressures. Fading expectations of additional interest rate hikes by the Australian central bank might cap the upside for the Aussie in the near term.
The BoJ is likely to raise its benchmark interest rate to the highest level since 1995, undeterred by the absence of its governor. A Reuters poll showed economists projecting the Japanese central bank to raise rates to 1.25% in the fourth quarter (Q4) after a hike in June to 1.0%.
Technical Analysis:
In the daily chart, AUD/JPY retains a constructive bias as it holds above the 100-day simple moving average (SMA) and the lower Bollinger Band, suggesting underlying demand on dips. Price, however, trades just under the Bollinger mid-line, while the Relative Strength Index (RSI) hovers near a neutral 50, hinting at a consolidative tone within an overall uptrend.
On the topside, initial resistance emerges at the Bollinger middle band around 113.60, with the upper Bollinger Band near 114.92 acting as the next barrier if buyers regain control. On the downside, support sits first at the lower Bollinger Band around 112.25, ahead of the 100-day SMA clustered near 111.90, where a break would weaken the current bullish structure and open the door to a deeper corrective slide.
