The AUD/JPY currency pair traded in positive territory around 113.85 during the early European session on Tuesday, with the Australian Dollar strengthening against the Japanese Yen. This movement is attributed to the interest rate differential between the Reserve Bank of Australia (RBA), which currently holds its Official Cash Rate (OCR) steady at 4.35%, and the Bank of Japan (BoJ) [1]. The RBA's decision to pause follows three consecutive 25 basis point hikes earlier in the year [1].
Economists have cautioned that rising oil and fuel prices could prompt a fourth rate hike by the RBA this year, especially if geopolitical tensions involving US President Donald Trump and Iran are not resolved within a week [1]. Market participants have increased their expectations for an RBA rate hike, with traders now pricing in nearly a 23% chance of a hike in August and more than a 50% probability by December, according to the Guardian [1].
Technically, the AUD/JPY maintains a bullish near-term bias, trading above the 100-day simple moving average (SMA) and the Bollinger Bands’ 20-day middle band, indicating that the broader uptrend remains intact. The price is approaching the Bollinger upper band at 114.10, with further resistance at the May 13 high of 114.74 and the psychological level of 115.00. On the downside, support levels are noted at the July 20 low of 113.10, the 100-day SMA at 112.75, and the Bollinger middle band at 112.55, with deeper support near 111.05 if a corrective pullback occurs [1].
Despite the bullish trend, concerns about possible intervention from Japanese authorities could limit further upside for the AUD/JPY cross [1]. No explicit analyst opinions or forward-looking statements beyond the rate hike probabilities and intervention risks are provided in the source.
CONCLUSION
AUD/JPY continues to gain ground, supported by the RBA's steady policy and market expectations for further rate hikes. However, upside potential may be capped by intervention risks from Japanese authorities. The market remains attentive to both central bank actions and geopolitical developments.