AUD/JPY Dips Below 110 as RBA Hike Hopes Fade
The AUD/JPY currency pair is trading lower around 109.70 during Monday’s early European session. The Australian Dollar (AUD) is weakening against the Japanese Yen (JPY) as expectations for a Reserve Bank of Australia (RBA) interest rate hike in November have significantly diminished following the latest Consumer Price Index (CPI) report, which met expectations. Market probabilities for an RBA rate hike have dropped to about 20%, according to data from LSEG.
In Japan, Chief Cabinet Secretary Minoru Kihara stated there are no plans for an additional crude oil release from national reserves, despite a G7 agreement to release 100 million barrels of diesel and crude. Former Bank of Japan (BoJ) board member Asahi Noguchi remarked that underlying inflation is near the BoJ’s 2% target, and wages are aligning with that inflation level, making demand-boosting policies risky.
Analysts at MUFG/BTMU emphasized the importance of upcoming data, including BoJ Governor Kazuo Ueda’s speech on October 6 and wage figures. They anticipate a slowdown in labour cash earnings growth to 3.7% from 4.3%, but expect base-pay momentum to remain strong, keeping the possibility of further monetary tightening in play.
Technically, AUD/JPY maintains a bearish outlook, trading below the 20-day simple moving average (SMA) and the 100-day SMA. The Relative Strength Index (RSI) at 34.97 suggests downside momentum is still in control but somewhat stretched. Immediate resistance is seen at 110.65, with stronger barriers at 112.20 and 112.56. Support is found at 109.08, with a break below potentially leading to further declines.