In early trading in Europe on Friday, the Australian dollar against the yen was below 111.25. The Japanese yen strengthened slightly against the Australian dollar as Tokyo’s Consumer Price Index (CPI) saw inflation rise for the first time in eight months. Meanwhile, the Bank of Japan (BOJ) is sticking with its path of potential interest rate hikes.
Traders are also cautious about possible currency interventions by Japanese authorities that could support the yen and limit gains in the cross rate. Japan’s Chief Cabinet Secretary Minoru Kihara noted on Tuesday that the country would respond appropriately to movements in currency if needed.
Technical analysis:
Looking at the daily chart, AUD/JPY is currently trading below the 100-day moving average (MA) and the 20-period Bollinger middle band, which indicates a short-term bearish trend. The pair is nearing the lower support of the 20-period Bollinger band, while the relative strength index stands at 34.18 (14), just above the oversold region. This suggests that while the downside momentum is strong, it might be nearing its limit.
If the pair can close above the 100-day moving average at 112.25, it could lead to a rise to Bollinger’s middle band at 112.95. The upper Bollinger band at roughly 114.77 could serve as a distant resistance.
On the downside, immediate structural support is found at the Bollinger lower band near 111.15. A clear drop below this level might trigger a more significant correction, while holding above could lead to a brief rebound towards the moving average cluster.
