The AUD/JPY pair has been on a strong upward trajectory, extending its winning streak for the ninth consecutive trading session. This consistent rally is driven by a combination of robust economic indicators from Australia and market anticipation surrounding key economic data from Japan. As the pair approaches critical resistance levels, traders are keenly observing potential movements that could dictate the future direction of AUD/JPY.
Key Takeaways
- AUD/JPY is maintaining its bullish momentum, trading near 99.60, driven by Australia’s economic resilience and supportive monetary policy.
- The Reserve Bank of Australia (RBA) recently held its Official Cash Rate (OCR) steady at 4.35%, signaling a continued hawkish stance due to persistent inflationary pressures.
- Anticipation builds around Japan’s upcoming Tokyo CPI data, which could influence the Bank of Japan’s (BoJ) monetary policy direction.
- The pair is approaching a significant resistance level at 99.87, with potential to test the psychological barrier at 100.00.
Technical Analysis
Price Action and Key Levels: 4-hour chart
On the 4-hour chart, AUD/JPY shows a consistent upward trajectory, approaching the significant resistance level around 99.87, which is the high from September 2. The current price action indicates strong bullish momentum, supported by multiple Break of Structure (BOS) events as highlighted in the chart. These BOS markers suggest a clear trend of higher highs and higher lows, a classic indication of an ongoing uptrend.
- Current Resistance: 99.87 (September 2 high)
- Next Key Resistance: 100.00 (psychological level)
- Major Support Levels: 98.50 (September 25 low), followed by 97.40 and 95.70.
Market Structure: 1-hour chart
The 1-hour chart shows a similar bullish structure with a Change of Character (ChOCH) near the 98.50 level, which has since led to further upside movement. The price is now in a premium zone, indicating that it is trading near its upper resistance levels. The equilibrium level on the 1-hour chart around 97.50 serves as a potential support area in case of a pullback.
Economic Data
Australian Economic Fundamentals
The RBA‘s decision to maintain the OCR at 4.35% reflects its commitment to controlling inflation while supporting economic growth. The central bank’s cautious yet hawkish stance suggests that interest rates are likely to remain at current levels, or potentially increase, if inflationary pressures persist.
Furthermore, Australia’s close economic ties with China have provided additional support for the AUD, especially following China’s announcement of significant monetary stimulus measures. These factors combined are bolstering the Australian Dollar against its Japanese counterpart.
Japanese Economic Outlook
On the other side, the Japanese Yen’s movement will largely depend on the upcoming Tokyo Consumer Price Index (CPI) data. The CPI excluding fresh food is expected to show a modest increase of 2%, down from 2.4% in July. A lower-than-expected CPI could dampen expectations for any immediate tightening by the BoJ, keeping the Yen under pressure.
Trading Recommendation
Buy on Breakout
Given the current technical setup and fundamental backdrop, traders might consider entering long positions on a decisive break above the 99.87 resistance level, targeting the 100.00 psychological level initially, and potentially the July 30 high of 101.78.
- Entry: Above 99.87
- Target 1: 100.00
- Target 2: 101.78
- Stop-Loss: Below 98.50
Risk Management
Given the pair’s proximity to overbought conditions, it’s crucial to implement tight stop-losses to protect against potential reversals, particularly if the Tokyo CPI data surprises to the upside.
Conclusion
AUD/JPY continues to exhibit strong bullish momentum, supported by favorable economic conditions in Australia and anticipation of dovish signals from Japan. As the pair approaches critical resistance levels, the potential for further upside remains strong, although caution is advised due to the impending economic data release from Japan.
