AUD/JPY Under Selling Pressure as Yen Hits One-Year High

Market Overview

On Monday, the Japanese yen surged to its highest level in over a year, driven by mounting expectations that the Federal Reserve will take a more dovish approach to rate cuts later this week. Trading volume in Asia was relatively light due to public holidays in Japan, China, and South Korea. However, the yen’s strength persisted, supported by its safe-haven status amid global economic uncertainties.

Meanwhile, the Reserve Bank of Australia (RBA) maintained its hawkish stance, with RBA Governor Michele Bullock emphasizing that it is premature to discuss rate cuts given persistently high inflation. Despite this, weaker-than-expected data from China and downward revisions of China’s growth forecast by Morgan Stanley have weighed heavily on the Australian dollar. Falling commodity prices and reduced global demand outlook further compounded the challenges for the risk-sensitive Australian dollar.

Technical Analysis

In the four-hour chart, AUD/JPY is firmly in a downward trend, trading below both the 100-period and 34-period moving averages. The pair is currently moving lower, targeting the key support at 93.585. If the bearish momentum continues and sellers manage to break below this critical level, further downside targets could emerge at 93.019, followed by 92.300 and 91.505.

The momentum indicators are in alignment with the downtrend. The RSI is in the bearish zone, signaling increasing selling pressure. Similarly, the MACD has crossed below the signal line, reinforcing the prevailing bearish sentiment.

Oscillator Confirmations

RSI: Currently in the bearish zone, indicating sustained selling pressure.

MACD: Bearish momentum confirmed as the MACD line crosses below the signal line.

Moving Averages: Both the 34-period and 100-period moving averages are trending downward, further confirming the overall bearish outlook.

Alternative Scenario

If buyers step in to defend the key support at 93.585, they will face significant resistance near 94.380. A sustained move above this level could bring the upper resistance at 95.665 into play, which would invalidate the current bearish scenario.

Key Levels Overview

• Resistance Levels:
  • Resistance 2: 95.665
  • Resistance 1: 94.380
  • Current Price: 93.896
• Support Levels:
  • Support 1: 93.585
  • Support 2: 93.019
  • Support 3: 92.300
  • Support 4: 91.505

Key Events to Watch

This week’s economic calendar highlights several key events for both the Japanese yen (JPY) and the Australian dollar (AUD). For the yen, the Bank of Japan’s (BoJ) interest rate decision on Friday, September 20, will be closely monitored. Although the central bank is expected to keep rates steady at 0.25%, traders will scrutinize the monetary policy statement and the accompanying press conference for hints about future policy direction, particularly concerning inflation and monetary tightening. Japan’s national CPI data, forecasted to rise to 2.8%, will also be critical in shaping the yen’s outlook. Furthermore, Japan’s trade balance, which recently posted a larger-than-expected deficit (-0.97T), could impact the yen’s trajectory, signaling weaker-than-expected export performance.

For the AUD, the August employment report showed weaker-than-expected job growth, with only 25.8K jobs added compared to the anticipated 58.2K. This has raised concerns about the health of the Australian labor market and may dampen expectations for further monetary tightening. While the unemployment rate held steady at 4.2%, the overall weaker employment data may put additional pressure on the Australian dollar, particularly with rising speculative net-short positioning against it.

Conclusion

The AUD/JPY pair faces increasing selling pressure as the yen strengthens to a one-year high. The key support level at 93.585 remains critical, and a break below this level could pave the way for further downside targets at 93.019, 92.300, and 91.505. On the upside, any recovery attempt will need to overcome resistance at 94.380 and potentially 95.665. Traders should keep a close eye on the upcoming Bank of Japan rate decision and Australian employment data, both of which could significantly impact the near-term direction of this pair.

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