- The AUD/JPY is likely to decline after reaching almost two months of highs on Tuesday, influenced by strong demand for the JPY.
- This trend supports speculation that the Bank of Japan (BOJ) will raise interest rates again in 2025.
- Optimism about trade and less aggressive expectations for rate cuts by the RBA might mitigate losses for the cross rate.
The AUD/JPY cross is expected to face selling pressure during Wednesday’s Asian trading session. Recently, it has traded near the 95.65 mark, hitting its peak from the past two months. Currently, it’s fluctuating around the 95.15 area, down almost 0.30%, which indicates increased strength in the JPY.
On Tuesday, the BOJ’s lieutenant governor reiterated that if the bank continues to see economic and price improvements, they will likely continue to raise interest rates. This perspective reinforces the possibility of tighter policies from the BOJ, further contributing to price pressures in Japan, which puts a strain on the AUD/JPY cross.
In the meantime, the Australian Dollar is finding support thanks to a wage price index that’s exceeded expectations. Additionally, there’s a growing belief in aggressive interest rate cuts from the Reserve Bank of Australia (RBA) amid tensions from the US-China trade situation. Plus, a weaker US dollar is acting in favor of the AUD, preventing traders from making overly bearish bets on the AUD/JPY cross.
The points outlined above suggest that some buyers may step in at lower levels, allowing for some attention on potential upward movements in the near term. Traders are also looking forward to a key monthly employment report from Australia set to be released during Thursday’s Asian session.
