AUD/JPY Price Forecast: Weakens to near 112.50, near-term outlook remains bearish

The AUD/JPY currency cross traded in negative territory around 112.55 during early European trading hours on Friday. Traders, cautious for potential Japanese currency intervention, observed the Japanese Yen strengthening against the Australian Dollar. Mitsuhiro Furusawa, a former top currency diplomat for Japan, indicated Tokyo might engage in joint JPY intervention with the United States, signaling a potential fast rate hike to curb the yen's decline.

Currently, markets anticipate a 76% probability of a Bank of Japan (BoJ) rate hike in September, up from 24% on July 30. DBS Group Research noted that the yen's undervaluation, previously at record levels, began to correct after Japan coordinated its second FX market intervention of the year with the US, illustrating the impact of this unusual collaboration aimed at curbing excessive Yen weakness.

The AUD/JPY pair is below the Bollinger middle band and the 100-day moving average, indicating a bearish near-term outlook as the price remains capped beneath these overlapping resistance levels. The Relative Strength Index (14) stands at 50.43, neutral, suggesting consolidation rather than strong directional momentum. Downside risks persist as long as the cross stays under the 100-day average.

Should the cross close above the Bollinger middle band at 112.70 and the 100-day average at 112.90, selling pressure may subside, potentially supporting the price toward the July 27 high of 114.67 and the Bollinger upper band near 115.40. Conversely, the initial support level is at the August 10 low of 111.63. The critical barrier is the Bollinger lower band at 110.00, a break of which could signal a deeper corrective phase towards the lower end of the recent range.