The AUD/JPY pair continues to trade in a narrow range near 100.50 for the third consecutive day, reflecting subdued movement in the early European session on Monday. Diverging economic and policy factors in both Australia and Japan have kept the pair steady, despite underlying volatility.
Australian Dollar Buoyed by Share Market Rally and Hawkish RBA
The Australian Dollar (AUD) finds support from robust domestic equity markets. The S&P/ASX 200 Index reached new all-time highs on Monday, mirroring the rally on Wall Street, where the Dow Jones closed at a record high on Friday. This momentum has spurred optimism for foreign inflows, lending upward pressure to the AUD.
Adding to the bullish sentiment, the Reserve Bank of Australia‘s (RBA) hawkish monetary policy stance continues to limit the AUD/JPY pair’s downside. The upcoming release of Australia’s October Monthly Consumer Price Index (CPI) will be a focal point for traders, as it could shape expectations for future RBA rate decisions.
Japanese Yen Under Pressure Amid Policy Uncertainty
The Japanese Yen (JPY) faces challenges in maintaining its safe-haven appeal amid a risk-on market environment and uncertainty over the Bank of Japan’s (BoJ) policy direction. BoJ Governor Kazuo Ueda has suggested the possibility of a December rate hike, but traders remain cautious, given the broader economic outlook.
Prime Minister Shigeru Ishiba’s administration is reportedly considering a $90 billion stimulus package to counteract inflation‘s impact on households, signaling potential fiscal support that could weigh on the yen. Additionally, Japan’s Leading Economic Index for September was revised downward to 109.1 from the expected 109.4, though it still reflected an improvement from August’s two-year low of 106.9.
Key Data and Events to Watch
Investors will be closely monitoring several key releases this week. For Australia, the October CPI will serve as a critical indicator of inflationary pressures and RBA policy trajectory. Meanwhile, Japanese economic data, including Tokyo inflation and employment figures, could offer further clarity on BoJ’s stance ahead of its December meeting.
Technical Overview
The AUD/JPY pair continues to hover near the 100.50 level. Immediate support lies around the psychological 100.00 mark, with stronger support at 99.75. On the upside, resistance is seen near 101.00, followed by the recent high around 101.50. Sustained movement beyond these levels could indicate a potential breakout.
Outlook
The AUD/JPY cross is likely to remain influenced by contrasting monetary policy signals and economic data from both nations. While the Australian Dollar benefits from positive equity momentum and RBA policy expectations, the Japanese Yen’s movement may hinge on the BoJ’s policy clarity and the success of Japan’s proposed stimulus measures. In the near term, the pair is expected to trade range-bound with a slight bullish bias, contingent on upcoming data releases.
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