AUD/JPY Sellers Target Key Support Amid Diverging Monetary Outlooks
Market Overview
The Australian dollar (AUD) faces renewed selling pressure against the Japanese yen (JPY) as diverging monetary policy trajectories shape the pair’s outlook. The yen has strengthened following the Bank of Japan’s (BoJ) decision to raise its policy rate to the highest level since the global financial crisis. Additionally, the BoJ revised its inflation forecast upwards, signaling a more hawkish stance. Kazuo Ueda, the BoJ Governor, emphasized the central bank’s commitment to tightening monetary policy amid rising wages and prices. However, he provided limited details regarding the timing and pace of future rate hikes.
Meanwhile, the AUD remains under pressure due to mounting concerns about global commodity demand. Expectations of potential U.S. trade tariffs have further weighed on the Australian currency, reflecting its vulnerability to shifts in global trade dynamics. This stark contrast in fundamentals between the two currencies has amplified bearish sentiment for AUD/JPY, suggesting further downside potential in the short term.
Technical Analysis
On the hourly chart, AUD/JPY has exhibited a bearish bias, highlighted by its recent breakdown below a key ascending trendline. Following this breach, the pair experienced a bearish gap and a subsequent rebound to test the broken support level. However, sellers regained control, pushing the price lower toward the critical support level at 97.700.
If the pair sustains a break below 97.700, it could open the door for further declines, with immediate downside targets at 97.552, 97.364, and 97.157. The Bollinger Bands display a downward slope, reinforcing the bearish momentum. Moreover, the RSI remains below its midpoint, and the MACD indicates strengthening bearish pressure, confirming the dominance of sellers.
On the flip side, if buyers regain control, they will face initial resistance at 97.907, followed by the key level of 98.243. A decisive break above 98.243 would invalidate the bearish outlook and signal a potential trend reversal to the upside.
Key Technical Levels
- Resistance Levels: 97.907, 98.243
- Support Levels: 97.700, 97.552, 97.364, 97.157
Fundamental Factors
Japan’s monetary policy remains a central driver of the yen’s performance, with the BoJ’s recent hawkish stance offering additional support for the currency. The upcoming release of the Corporate Services Price Index (CSPI) on Tuesday and the minutes from the latest BoJ meeting on Wednesday will provide further insights into the central bank’s outlook.
In contrast, the Australian dollar is weighed down by fears of weaker global commodity demand amid potential U.S. trade tariffs. Key data releases, including Australia’s Business Confidence Index on Tuesday and inflation figures on Wednesday, are expected to influence AUD sentiment. These reports will be closely watched for indications of economic resilience and potential policy responses from the Reserve Bank of Australia.
Conclusion
The AUD/JPY pair remains under bearish pressure, with sellers eyeing a sustained break below critical support at 97.700. While technical indicators confirm the dominance of downward momentum, upcoming economic events in both Japan and Australia could introduce volatility, potentially influencing the pair’s trajectory.
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