AUD/JPY Price Forecast: Key upside barrier emerges near 97.00
- AUD/JPY gains traction to around 96.20 in Tuesday’s early European session, up 0.53% on the day.
- The cross keeps the negative outlook below the 100-period EMA with the bearish RSI indicator.
- The initial support level is seen at 95.05; the key upside barrier to watch is 97.00.
The AUD/JPY cross attracts some buyers to near 96.20 during the early European session on Tuesday. US President Donald Trump's decision to delay plans to impose trade tariffs on Canada and Mexico weighs on the safe-haven currency like the Japanese Yen (JPY). Nonetheless, the upside for the pair might be limited amid rising bets that the Reserve Bank of Australia (RBA) could consider a rate cut in February.
Technically, the bearish outlook of AUD/JPY remains in place as the cross remains capped below the key 100-period Exponential Moving Average (EMA) on the 4-hour chart. Furthermore, the downward momentum is supported by the Relative Strength Index (RSI), which is located below the midline, suggesting that the path of least resistance is to the downside.
The lower limit of the Bollinger Band at 95.05 acts as an initial support level for the cross. A decisive break below the mentioned level could expose 94.62, the low of February 3. Further south, the next contention level is seen at the 94.00 psychological mark.
On the bright side, the key resistance level for AUD/JPY emerges near 97.00, representing the 100-period EMA and the upper boundary of the Bollinger Band and round figure. Sustained trading above this level could pave the way to 97.95, the high of January 14. Extended gains could see the next hurdle at 98.34, the high of January 22.
AUD/JPY 4-hour chart
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
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