Market Overview

During the early hours of Friday’s European trading session, the AUD/JPY pair was recorded below 114.00, showing a decline. Recent data indicated that Tokyo’s core consumer price index (CPI) inflation dropped below the Bank of Japan’s (BOJ) 2% target for the fourth month in a row. Despite this, analysts anticipate a rebound in inflation in the months ahead, spurred by climbing oil prices and increased import costs tied to a weakening yen, which could pressure the BOJ to consider raising interest rates.

On another note, Australia experienced a lower-than-expected CPI increase in April. This development has led traders to temper their expectations regarding an immediate interest rate hike by the Reserve Bank of Australia (RBA), impacting the Australian financial market.

The ASX RBA Rate Tracker indicates that financial markets foresee a nearly 93% likelihood that the RBA will maintain the Official Cash Rate (OCR) during its policy meeting in June.

Technical Analysis

Looking at the daily chart, the AUD/JPY remains robust just below the upper Bollinger Band, displaying a generally bullish outlook. The price holds well above the 20-day simple moving average (the middle Bollinger Band) as well as the 100-day moving average. This suggests that the overall uptrend is still intact, despite a recent pause in momentum. The Relative Strength Index (14) is currently around 55, pointing to a neutral to positive momentum rather than an overbought condition, possibly indicating further profit opportunities for buyers if resistance is overcome.

In terms of resistance, the immediate level is near 114.65, at the top of the Bollinger Bands. A daily close above this level could signal continued upward movement. Conversely, initial support is observed at the 20-day SMA around 113.70. Additional support lies below the Bollinger Bands at approximately 112.78, and near the 100-day EMA around 110.77, which would need to break to disrupt the prevailing bullish structure.