AUD/JPY Price Forecast: Maintains bullish outlook above 100.50
The AUD/JPY cross trades in negative territory near 100.85 during the early European session on Friday.
  • AUD/JPY softens to around 100.85 in Friday’s early European session. 
  • A constructive outlook prevails above the 100-day EMA, with the bullish RSI indicator. 
  • The immediate resistance level is seen in the 101.80-101.85 region; the crucial downside target is located at 100.00. 

The AUD/JPY cross trades in negative territory near 100.85 during the early European session on Friday. The potential downside for the Australian Dollar (AUD) might be limited due to the strong job market, suggesting that the Reserve Bank of Australia (RBA) is likely to keep interest rates on hold for now. 

Data released by the Australian Bureau of Statistics (ABS) on Thursday showed that Australia’s Unemployment Rate declined to 4.3% in October from 4.5% in September. The figure came in below the market consensus of 4.4%. Furthermore, the Australian Employment Change arrived at 42.2K in October versus 12.8K in September (revised from 14.9K), compared with the consensus forecast of 20K.

Technically, AUD/JPY keeps the bullish vibe in the longer term as the cross is well-supported above the key 100-day Exponential Moving Average (EMA) on the daily chart. The upward momentum is reinforced by the 14-day Relative Strength Index (RSI), which stands above the midline near 59.10. This suggests the bullish momentum in the near term. 

On the bright side, the key upside barrier for the cross emerges in the 101.80-101.85 zone, representing the upper boundary of the Bollinger Band and the high of November 13. Sustained trading above the mentioned level could see a rally to 102.30, the high of November 8, 2024. The next hurdle to watch is 103.48, the high of April 26, 2024. 

On the downside, the key support level for AUD/JPY is located at the 100.00 psychological level. More bearish candlesticks below the mentioned level could pull the cross back toward 98.97, the low of November 7. Further south, the next contention level to spot is 98.28, the lower limit of the Bollinger Band.

AUD/JPY Daily 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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