AUD/JPY Price Forecast: Recovers above 110.50, but technical outlook stays bearish

The AUD/JPY cross trades in positive territory around 110.85, snapping the four-day losing streak during the early European session on Monday. The Australian Dollar (AUD) strengthens against the US Dollar (USD) as increasingly sticky inflation underpins a hawkish outlook for the Reserve Bank of Australia (RBA). 

The RBA is anticipated to hike the Official Cash Rate (OCR) from 4.35% to 4.60% at the conclusion of a meeting on Tuesday. That would be the fourth increase in 2026 and mark its highest level rate since 2011. 

“The ongoing escalation of the conflict in the Middle East and the tendency of the RBA to view the resultant increase in oil prices as much more of an inflation shock than a growth shock… makes us view two rate hikes (September and November) as more likely than one,” said ANZ analysts last week.

Attention will shift to Australia’s August Consumer Price Index (CPI) inflation data on Wednesday. The headline CPI is expected to show a rise of 4.1%. Any signs of hotter inflation in Australia could lift the Aussie against the Japanese Yen (JPY) in the near term. 

Traders remain on high for currency intervention from Japanese authorities, which might cap the downside for the JPY. Japan's Prime Minister Takaichi Sanae said on Friday that US President Donald Trump expressed concern about the Yen's weakness during their latest summit.

Meanwhile, Japanese Finance Minister Katayama Satsuki reconfirmed "the yen's undervaluation is problematic" after speaking by phone with US Treasury Secretary Scott Bessent.

RBA seen delivering decisive hike as Australia data stays hot

Economists at ING expect the RBA to “deliver a decisive 25bp rate hike on Tuesday,” arguing that the move reflects “an economy that continues to run hot across multiple fronts.” They highlight that “labour market conditions remain tight, second-quarter GDP growth surprised to the upside, and recent inflation readings came in stronger than expected,” reinforcing the case for further tightening. ING also points to upcoming price data, noting that “August CPI data is likely to accelerate further to 4.1% year-on-year, driven primarily by higher diesel and food prices, alongside persistent underlying core inflation pressures.”

Technical Analysis: AUD/JPY remains capped under the 100-day SMA

In the daily chart, AUD/JPY keeps a bearish near-term tone as the spot holds below the 100-day simple moving average (SMA) and the Bollinger middle band. Price is closer to the lower end of the Bollinger envelope, while the Relative Strength Index (RSI) holds below the midline at 41.58, hinting at weak but not oversold downside momentum.

On the topside, initial resistance level emerges at the Bollinger middle band near 111.45, en route to the September 22 high of 112.22 and the 100-day SMA around 112.80. A decisive break above this level could pave the way to the upper boundary Bollinger band near 113.70.  

On the downside, the critical support level is located at the 100.00 psychological level. Further south, the lower limit Bollinger band at 109.25 acts as the next key support, where sellers may start to lose traction if tested.