AUD/JPY Faces Key Support as Sellers Test Multi-Month Lows
Market Overview
The Australian dollar (AUD) remains under pressure against the Japanese yen (JPY) as investors react to softer-than-expected inflation data from Australia. The latest report has prompted National Australia Bank (NAB) to join Westpac in calling for an earlier rate cut by the Reserve Bank of Australia (RBA). With inflation easing at a faster pace than anticipated, the Australian banking sector now sees a stronger case for monetary policy easing, accelerating speculation that the RBA will cut rates sooner rather than later.
Meanwhile, in Japan, monetary policy is taking a contrasting trajectory. The Bank of Japan (BoJ) recently raised its policy rate by 25 basis points, strengthening the yen and reinforcing the divergence between the two economies. This policy contrast has exerted downward pressure on AUD/JPY, pushing the pair towards critical support levels.
Technical Analysis
On the daily chart, AUD/JPY remains confined within a symmetrical triangle pattern, with sellers attempting to break the lower boundary. The pair is currently testing support at 96.056, which aligns with the latest swing low. A sustained break below this level could confirm a bearish continuation, exposing key downside targets at 95.321, a two-month low, followed by 94.386 and 93.354 as the next major support zones.
Momentum indicators RSI and MACD both signal increasing bearish pressure, as they remain in the oversold territory, confirming the dominance of sellers. The price is also trading below its 100-day and 34-day moving averages, reinforcing the overall bearish bias.
On the upside, for buyers to regain control, the pair must break above 97.088, with a further rally above 98.758 needed to shift the market sentiment towards a bullish outlook.
Key Technical Levels
- Resistance Levels: 97.088, 98.758
- Support Levels: 96.056, 95.321, 94.386, 93.354
Fundamental Factors
The absence of major economic data due to the Lunar New Year holiday across Asia has kept broader market movements relatively muted. However, in Japan, foreign investment in Japanese equities has surged, reflecting increased capital inflows following the BoJ’s rate hike. This has provided additional support for the yen, further weighing on AUD/JPY.
In Australia, the latest import price index failed to meet expectations, reinforcing the broader downtrend in inflation across various sectors. This has strengthened market bets that the RBA may accelerate its rate-cut timeline, putting additional downside pressure on the Australian dollar.
Conclusion
The AUD/JPY pair remains under heavy selling pressure, with momentum indicators and fundamental factors supporting a continuation of the downtrend. If 96.056 breaks decisively, further declines towards 95.321 and lower levels could follow. However, a reversal above 97.088 would be required to invalidate the bearish outlook.
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