AUD/JPY Extends Decline as RBA Rate Hike Hopes Fade
The Australian Dollar (AUD) against the Japanese Yen (JPY) is under pressure, trading near 109.70 in early European trading on Monday. Market expectations for a Reserve Bank of Australia (RBA) rate hike in November have diminished, with money markets now pricing only a 20% chance of an increase following a recent Consumer Price Index (CPI) reading that met forecasts.
In Japan, Chief Cabinet Secretary Minoru Kihara announced that there are no plans for an additional release of crude oil from national reserves, despite earlier Group of Seven agreements. Former Bank of Japan (BoJ) board member Asahi Noguchi commented on domestic inflation, stating that underlying inflation is near the BoJ’s 2% target and that policies boosting demand could be too risky.
Analysts at MUFG/BTMU highlight the importance of upcoming developments in Japan, particularly BoJ Governor Kazuo Ueda’s speech on October 6th and wage data, which will shape expectations for future monetary policy. They note that while headline labor cash earnings growth is expected to slow, underlying base-pay momentum is likely to remain firm, supporting the prospect of further monetary tightening.
Technically, the AUD/JPY pair retains a bearish bias, trading below key moving averages such as the 20-day and 100-day SMAs. The Relative Strength Index (RSI) stands at 34.97, indicating that while the downside momentum is strong, the move lower is becoming stretched. Immediate resistance is seen at 110.65, with broader resistance at 112.20 and 112.56, while support is found at 109.08.