Buckle up, Forex traders! The AUD/JPY pair is currently at a crucial juncture, testing a nine-day support level below 96.50. All eyes are glued to the upcoming Reserve Bank of Australia (RBA) policy decision, expected later today. Will the RBA’s anticipated rate cut send the Aussie Dollar tumbling further against the Yen? Let’s dive into the technical analysis and market expectations to understand what could be next for this popular currency pair. AUD/JPY Forecast: Navigating the 96.50 Support Level The AUD/JPY pair is currently dancing around the 96.40 mark during Tuesday’s Asian trading session, attempting a recovery after recent losses. However, this recovery attempt is fragile as the pair grapples with immediate support at the nine-day Exponential Moving Average (EMA), currently around 96.34. This level is proving to be a critical near-term battleground. Adding to the bearish sentiment, the 14-day Relative Strength Index (RSI) remains below the 50 level, hovering in negative territory. This indicator suggests that bearish momentum is still in play, potentially signaling further downside pressure on the AUD/JPY. On the upside, the path of resistance appears to be capped by the descending channel’s upper boundary, looming around the 97.00 level. This channel pattern, visible on the daily chart, reinforces the overall bearish bias in the medium term. RBA Policy Decision: The Key Catalyst for AUD/JPY Traders are holding their breath in anticipation of the Reserve Bank of Australia’s (RBA) policy decision. The central bank is widely expected to announce a 25 basis points (bps) cut to its Official Cash Rate (OCR), bringing it down to 4.10%. This would mark the first rate cut in four years, a significant shift in monetary policy. Here’s what market participants are expecting from the RBA: Rate Cut Expectation: A 25 bps cut is almost fully priced in by the markets. Forward Guidance: The focus will be on the RBA’s statement and Governor Bullock’s press conference for clues about future policy moves. Will this be the start of a series of cuts, or a one-off adjustment? Market Reaction: The AUD/JPY, and the Australian Dollar in general, is likely to react strongly to the RBA’s announcement and forward guidance. A dovish tone could trigger further AUD weakness. Technical Analysis: Decoding the AUD/JPY Chart A closer look at the daily chart reveals that the AUD/JPY is trading within a descending channel pattern. This technical formation typically suggests a prevailing bearish trend. Let’s break down the key technical levels to watch: Key Technical Indicators: Descending Channel: The pair is confined within a descending channel, indicating a bearish bias. 14-day RSI: Below 50, reinforcing bearish momentum. 9-day EMA: Currently acting as immediate support around 96.34, but neutrality is suggested as price hovers around it. 50-day EMA: Located at 97.18, acting as a significant resistance level above the descending channel’s upper boundary. Critical Price Levels: Level Type Price Level Significance Immediate Support 96.34 (9-day EMA) Break below could accelerate losses Next Support 94.37 Five-month low (Feb 10) Further Support 93.59 Six-month low (Sep 11) Channel Bottom Support Around 93.50 Strong support zone Immediate Resistance 97.00 Descending channel upper boundary Key Resistance 97.18 50-day EMA Major Resistance 98.77 Six-week high (Jan 24) Australian Dollar (AUD) Strength Today Despite the bearish technical outlook for AUD/JPY, it’s worth noting the Australian Dollar’s performance against other major currencies today. As per the table below, the AUD is showing relative strength against some pairs, particularly the New Zealand Dollar. Australian Dollar PRICE Today USD EUR GBP JPY CAD AUD NZD CHF USD 0.15% 0.17% 0.26% 0.07% 0.24% 0.47% 0.09% EUR -0.15% 0.02% 0.11% -0.08% 0.10% 0.32% -0.06% GBP -0.17% -0.02% 0.10% -0.10% 0.08% 0.30% -0.08% JPY -0.26% -0.11% -0.10% -0.19% -0.02% 0.19% -0.18% CAD -0.07% 0.08% 0.10% 0.19% 0.17% 0.40% 0.02% AUD -0.24% -0.10% -0.08% 0.02% -0.17% 0.22% -0.16% NZD -0.47% -0.32% -0.30% -0.19% -0.40% -0.22% -0.37% CHF -0.09% 0.06% 0.08% 0.18% -0.02% 0.16% 0.37% Note: The table shows percentage changes of Australian Dollar (AUD) against listed major currencies today. This relative strength suggests that while AUD/JPY faces specific pressures, the Australian Dollar isn’t universally weak. However, the looming RBA decision is the dominant factor for the AUD/JPY pair. Concluding Thoughts: Brace for Volatility Post-RBA The AUD/JPY is delicately poised ahead of the RBA policy decision. The 96.50 support level is under intense scrutiny, and a break below this could open the door for a test of lower levels, potentially towards the 94.37 five-month low. Conversely, a surprise hawkish tilt from the RBA, although unlikely, or a weaker-than-expected Yen, could trigger a bullish reversal, targeting the 97.00-97.18 resistance zone. For Forex traders, this means heightened volatility is expected in the AUD/JPY pair during and after the RBA announcement. Careful risk management and monitoring of price action around key technical levels will be crucial in navigating potential trading opportunities. To learn more about the latest Forex market trends, explore our article on key developments shaping currency market volatility and trading strategies.
