AUD/JPY Price Forecast: Stages recovery after hitting five-month low
- AUD/JPY rebounds from 94.30 low, showing minimal change as Asian session progresses.
- Neutral to slight downward bias indicated; key breakout point at Kijun-sen 95.91 for gains.
- Watch resistance at 97.50 and support at 95.61 as traders navigate volatile trading conditions.
The AUD/JPY bounced off after hitting five-month lows of 94.30 on February 10, yet buyers stepped in and pushed the cross-pair above the 95.00 mark. At the time of writing, the pair is exchanged hands at 95.82, down a minimal 0.06 as Wednesday’s Asian session commences.
AUD/JPY Price Forecast: Technical outlook
The cross-pair is neutral to slightly downward-biased after dropping from a yearly peak of 99.15. On its way down, the AUD/JPY cleared the Ichimoku Cloud (Kumo), extending its losses to almost 4% in the year.
Since then, the AUD/JPY has recovered with momentum shifting neutral, as depicted by the Relative Strength Index (RSI). But if bulls want to regain some ground, they must clear the Kijun-sen at 95.91 before the pair challenges the bottom of the Kumo near 97.50.
If those two levels are surpassed, the next resistance would be the January 24 swing high at 98.75 before testing the top of the Kumo at 99.00.
For sellers, the scenario suggests they need to clear the Tenkan-sen at 95.61, followed by the 95.00 mark. If cleared the AUD/JPY remains vulnerable to further downside.
AUD/JPY Price Chart – Daily
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
Author
Christian Borjon Valencia
FXStreet
Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.
