HomeNewsAUD/JPY Could Target 102 on Yen Weakness
AUD/JPY Could Target 102 on Yen Weakness

AUD/JPY Could Target 102 on Yen Weakness

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AUD/JPY may get the breakthrough needed to push above the sought-after 100 level if the Reserve Bank of Australia announces a 50 bp rate hike later today.

The RBA is forecast to lift the Official Cash Rate (OCR) by 50 basis points from 1.85% to 2.35% on Tuesday. If as expected, the RBA tightens, it will mark the fifth-consecutive rate hike. Should the expected hike arrive, it will widen the policy differential between the RBA and the Bank of Japan (BOJ) even further.

BOJ Governor Haruhiko Kuroda’s reluctance to raise rates has caused the yen to weaken considerably this year. Despite the Japanese currency reaching a 24-year low against the dollar and and eight year low vs the Aussie, Koruda remains resolute.

At the Jackson Hole Symposium in August, Kuroda blamed Japan’s inflation on higher commodities, not low rates. As a result, the yen continues to concede ground to the Aussie dollar. Furthermore, the chart suggests the Australian dollar to Japanese Yen exchange rate has more room to run.

Aussie to Yen Price Forecast

The daily chart shows USD/JPY is consolidating atop 95.00. The rate is above the major Daily Moving Averages (DMA). Of which, the 50-DMA at 88.02 (green) is the first technical support. Notably, despite the market trending higher, the Relative Strength Index (RSI) is trending lower. Technical traders often consider this a “bearish” divergence, predicting lower prices ahead. Nonetheless, the Aussie remain s in the driving seat for now.

If the market reacts favorably to the RBA decision, we might expect to see AUD/JPY clear the overhead resistance at 96.88 (may 30 high). In this event, an extension into the 100.00 – 102.00 trading range is possible. However, disappointment could enable yen strength. In this scenario, support is seen around 92.00 yen to the Aussie.

Considering the fundamental differences in Australia’s and Japan’s monetary policy, a bullish outcome is more likely. For that reason, we expect AUD/JPY to test the 100 level in the coming weeks. However, the immediate outlook becomes less clear below 92.00. And for that reason, a close below this level flips the near-term outlook to neutral.

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AUD/JPY Price Forecast

Elliot Laybourne
Elliott is a former investment banker with a 20 year career in the city of London. During this time he held senior roles at ABN Amro, Societe Generale, Marex Financial and Natixis bank, specialising in commodity derivatives and options market-making. During this time, Elliott’s client list included Goldman Sachs, JP Morgan, Credit Suisse, Schroders Asset Management, and the Pennsylvania State Public School Employees Retirement System, amongst others. Today, he splits his time between Thailand and Dubai, from where he provides trading consultancy and business development services for family office and brokerage clientele.