The AUD/JPY currency pair traded in positive territory near 112.80 during early European trading hours on Friday, rebounding above the 112.50 level. However, the pair's upside appears limited as traders increased bets on a Bank of Japan (BoJ) interest rate hike, which has strengthened the Japanese Yen (JPY) [1]. BoJ board member Hajime Takata stated that the central bank should conduct interest rate hikes nimbly to counter intensifying inflationary pressures, rather than sticking to a fixed semiannual pace as previously anticipated by markets. Analysts now believe the BoJ could adopt a more hawkish stance than expected at its meeting scheduled for September 17 to 18 [1].
Masahiko Loo, senior fixed income strategist at State Street Investment Management in Tokyo, commented, 'This feels less like a short squeeze and more like the market cautiously reassessing a more hawkish BOJ path.' He added that markets are beginning to accept the possibility that Japan may continue normalizing policy into 2027 [1].
Strategists at BNY expressed skepticism about the effectiveness of official intervention alone in generating sustained JPY appreciation, noting that the government's policy stance remains reflationary and that the current environment differs from the early Abenomics period due to higher inflation and less prominent structural reform. However, BNY also emphasized that this does not necessarily mean the yen must weaken further [1].
From a technical perspective, AUD/JPY remains capped under the 100-day simple moving average (SMA) and the Bollinger middle band, indicating a bearish near-term tone. The Relative Strength Index (14) is around 45, suggesting fading upside momentum. Key resistance levels are at the 100-day SMA (113.20) and the Bollinger middle band (113.40), with a more distant cap at the upper Bollinger band (115.05). On the downside, support is found at the lower Bollinger band (111.80), with further selling potentially exposing the July 3 low (111.33) and the August 4 low (110.01) [1].
CONCLUSION
The AUD/JPY pair is rebounding but faces technical resistance and a potentially more hawkish BoJ, which could limit further upside. Market participants are reassessing the yen's outlook amid skepticism about the effectiveness of intervention and the possibility of continued policy normalization by the BoJ. The near-term tone remains bearish unless key resistance levels are breached.