AUD/JPY Price Forecast: Extends decline below 109.00, bearish bias remains intact under 100-day SMA

EUR/USD prices declined below the crucial resistance level of 1.1200 during early European trading hours on Friday, as the pair traded at 1.1195. The market may become cautious later in the day due to the release of key economic indicators from Germany, such as Industrial Production, Eurozone Retail Sales, and US employment data.

Safe-haven demand from a global sell-off in AI stocks could provide support to the US dollar (USD) against the Euro (EUR). Dilin Wu, a research strategist at Pepperstone, mentioned that the dollar is benefiting from safe-haven demand. However, the Democrats' victory in the US midterm elections may prompt traders to lower their expectations for further Federal Reserve rate hikes.

Fed funds futures now project a 25-basis-point interest rate increase in December at around 70.9%, down from over 82.7% on Wednesday. US job data, particularly the September Nonfarm Payrolls (NFP) report, is expected to provide insights into the Fed's rate path. September is projected to show an increase of 65,000 jobs, while the Unemployment Rate is estimated to remain steady at 4.2%.

Deutsche Bank analysts noted that yesterday's session lacked data, with the Euro Area flash CPI for October in line with expectations. Headline inflation rose to a 3-year high of +4.0%, while core inflation stayed at +2.5%. The yield on 10-year German Bunds fell by 5.8 basis points to 3.27%, while 10-year OATs saw their largest daily decline since April, reaching 4.77%.

This move also pushed the Franco-German 10-year spread down by -11.8 basis points to 150 basis points, the narrowest level in weeks. The Euro 1-year inflation swap dropped to a two-month low of 3.10%, while the US inflation swap hit a two-month low of 2.16%. ECB President Lagarde's speech received a score of 6.2/10 on the FXS Speechtracker, slightly above the historical average of 5.6/10, indicating a slightly more hawkish tone.

Lagarde emphasized the need to apply tools to prevent inflation from getting out of control and the difficulty in distinguishing supply- and demand-driven shocks. This information points to a European Central Bank that remains cautious about easing. Lagarde's comments on US tariffs and mid-term elections suggest lingering trade and growth uncertainties, which could hinder a strong Euro rally.

The daily chart for EUR/USD remains bearish near-term, with the pair trading below the 100-day simple moving average (SMA) and hovering near the 20-day Bollinger middle band. The Relative Strength Index (14) at 44 is below the neutral 50 line, suggesting only modest recovery momentum within a broader downside bias. The next resistance level is at the upper boundary of the Bollinger band near 1.1255, leading to the July 28 low of 1.1353 and the more significant barrier at the 100-day SMA around 1.1415.

A breakout above this level could trigger a rally to the August 7 high of 1.1581. On the downside, immediate support is provided by the lower limit of the Bollinger band near 1.1132, potentially opening the way to the 1.1100 psychological level and the May 2025 low of 1.0951.