AUD/JPY Price Forecast: Softens below 111.00, bearish vibe prevails below 100-day SMA

The Australian Dollar (AUD) against the Japanese Yen (JPY) weakened to near 110.75 at the start of the European trading day on Thursday. The Yen is gaining strength against the Australian Dollar due to growing expectations of an interest rate increase by the Bank of Japan (BoJ) in the near future. According to a Reuters survey, the BoJ is expected to raise interest rates to 1.25% at its September meeting and potentially to 1.75% in the second quarter of 2027, earlier than anticipated.

BoJ board member Kazuyuki Masu suggested that the central bank may need to raise rates swiftly if inflation surges, considering the nation's loose financial conditions. On Wednesday, BoJ board member Hajime Takata hinted that the central bank could adopt a more aggressive stance than expected, with a 25-basis-point hike not being a final decision.

The central bank might consider consecutive rate hikes as well. DBS Group Research highlights that the BoJ must exercise caution during its upcoming meeting, as policymakers should be cautious about the potential market impact of significant policy surprises, particularly after the unforeseen rate hike in July 2024 sparked a large-scale Yen carry-trade unwinding and global financial market jitters.

The daily chart indicates that AUD/JPY is entering a corrective phase below the clustered resistance of the 100-day Moving Average (MA) and the Bollinger Bands' 20-period simple moving average (SMA), keeping the near-term bias bearish. The price is closely hugging the lower Bollinger band, while the Relative Strength Index (14) is around 33, indicating weak, oversold momentum that has yet to trigger a significant rebound.

The nearest resistance level is the August 10 low of 111.63, aiming for the August 20 low of 112.52. The critical obstacle is at 113.10, which corresponds to the 100-day MA and the Bollinger midline. The upper Bollinger band near 115.60 represents a more distant cap. If the price breaks beneath the lower Bollinger band at 110.60, it would expose the psychological 110.00 level, followed by the August 3 low of 109.24.