Market Update: AUD/JPY Performance
During the early hours of Tuesday in Europe, the AUD/JPY exchange rate was hovering around 113.85, showing some gains. The Australian dollar has gained ground against the Japanese yen, largely influenced by the interest rate discrepancies between the Reserve Bank of Australia (RBA) and the Bank of Japan (BoJ). However, there are lingering concerns about potential intervention from Japanese authorities, which might limit further increases.
At their June policy meeting, the RBA opted to keep the Official Cash Rate (OCR) steady at 4.35%. This decision followed a series of three consecutive rate hikes earlier in the year, which amounted to an increase of 25 basis points each time.
There’s some caution among economists who suggest that escalating oil and fuel prices could trigger another interest rate hike this year. This is especially pressing if the ongoing tensions between President Donald Trump and Iran remain unresolved over the next week.
Since airstrikes resumed last week, traders have heightened their expectations regarding the RBA’s interest rate decisions. Currently, there’s about a 23% chance of a hike in August, with those odds rising to over 50% by December, as reported by the Guardian.
Technical Analysis
Looking at the daily chart, the AUD/JPY is currently positioned above both the 100-day simple moving average (SMA) and the 20-day middle Bollinger Band. This indicates a sustained upward trend and supports a short-term bullish outlook. Prices are nearing the upper band of the Bollinger Bands, yet the Relative Strength Index, sitting around 60, suggests there’s solid but not excessive upward momentum.
For those looking at resistance levels, the immediate one aligns with the upper Bollinger Band at 114.10. The next significant resistance is found at the May 13 high of 114.74, as we edge closer to that psychological mark of 115.00.
As for support levels, the first notable point is at the July 20 low of 113.10. Following that, the 100-day SMA at 112.75 comes into play, with the middle Bollinger Band at 112.55 also being crucial. If we see a deeper pullback, keep an eye on the lower band around 111.05.
