AUD/JPY: Limited Downside Amid RBA Hawkishness and BoJ Uncertainty
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AUD/JPY Trading Near 100.50 Following Australian CPI Miss
The AUD/JPY cross has edged lower, reaching around 100.50 in Wednesday’s early European session. This movement follows softer-than-expected third-quarter inflation data from Australia, which raised questions about the Australian Dollar’s (AUD) short-term trajectory. The Australian Consumer Price Index (CPI) rose only 0.2% quarter-over-quarter, down from 1.0% in Q2, while the annual CPI showed a 2.1% increase in September, below the expected 2.3%.
RBA Hawkish Sentiment Limits Downside
Despite the weak inflation data, the AUD remains supported by the Reserve Bank of Australia’s (RBA) cautious stance, as the bank has expressed a preference for maintaining its 4.35% cash rate to control inflation without dampening employment. This stance reduces the likelihood of a rate cut in November, providing underlying support for the AUD. Market sentiment indicates that the RBA’s commitment to containing inflation within its 2-3% target range reinforces confidence in a stable rate outlook.
BoJ Rate-Hike Uncertainty and Weak Yen Impact
On the other side, the Japanese Yen (JPY) faces challenges amid heightened uncertainty over the Bank of Japan’s (BoJ) policy intentions. The recent loss of the parliamentary majority by the ruling Liberal Democratic Party (LDP) has compounded market concerns over the BoJ’s trajectory. Furthermore, Japan’s Economy Minister highlighted the impact of a weaker Yen on import costs, emphasizing the risk to household income if wage growth does not keep pace with inflationary pressures from imports.
With the BoJ’s policy decision set for Thursday, consensus among economists points to a likely pause, with 86% anticipating the central bank will hold rates steady at the October meeting. As this policy outlook creates further uncertainty for the Yen, the AUD/JPY cross could find support.
Technical Levels to Watch
Support: Initial support is seen at 100.20, followed by the psychological level at 100.00. Resistance: On the upside, the 101.20 mark could offer resistance, with additional resistance at 101.50, where sellers may test the cross again if the trend reverses. While the AUD/JPY currently trades within a narrow range, the hawkish outlook from the RBA combined with BoJ rate-hike uncertainty may provide the AUD with a modest edge in this pairing.
The AUD/JPY cross has edged lower, reaching around 100.50 in Wednesday’s early European session. This movement follows softer-than-expected third-quarter inflation data from Australia, which raised questions about the Australian Dollar’s (AUD) short-term trajectory. The Australian Consumer Price Index (CPI) rose only 0.2% quarter-over-quarter, down from 1.0% in Q2, while the annual CPI showed a 2.1% increase in September, below the expected 2.3%.
RBA Hawkish Sentiment Limits Downside
Despite the weak inflation data, the AUD remains supported by the Reserve Bank of Australia’s (RBA) cautious stance, as the bank has expressed a preference for maintaining its 4.35% cash rate to control inflation without dampening employment. This stance reduces the likelihood of a rate cut in November, providing underlying support for the AUD. Market sentiment indicates that the RBA’s commitment to containing inflation within its 2-3% target range reinforces confidence in a stable rate outlook.
BoJ Rate-Hike Uncertainty and Weak Yen Impact
On the other side, the Japanese Yen (JPY) faces challenges amid heightened uncertainty over the Bank of Japan’s (BoJ) policy intentions. The recent loss of the parliamentary majority by the ruling Liberal Democratic Party (LDP) has compounded market concerns over the BoJ’s trajectory. Furthermore, Japan’s Economy Minister highlighted the impact of a weaker Yen on import costs, emphasizing the risk to household income if wage growth does not keep pace with inflationary pressures from imports.
With the BoJ’s policy decision set for Thursday, consensus among economists points to a likely pause, with 86% anticipating the central bank will hold rates steady at the October meeting. As this policy outlook creates further uncertainty for the Yen, the AUD/JPY cross could find support.
Technical Levels to Watch
Support: Initial support is seen at 100.20, followed by the psychological level at 100.00. Resistance: On the upside, the 101.20 mark could offer resistance, with additional resistance at 101.50, where sellers may test the cross again if the trend reverses. While the AUD/JPY currently trades within a narrow range, the hawkish outlook from the RBA combined with BoJ rate-hike uncertainty may provide the AUD with a modest edge in this pairing.