AUD/JPY Price Forecast: Declines below 110.50 as bearish bias persists below 100-day SMA

The AUD/JPY cross trades in negative territory around 110.35 during the early European session on Monday. The Japanese Yen (JPY) strengthens against the Australian Dollar (AUD) as hawkish language may reinforce expectations that the Bank of Japan (BoJ) will raise interest rates this year.

The majority of economists polled by Reuters expect a rate hold at its October policy meeting on Friday, followed by a quarter-point hike at the following meeting in December.

"It's a historical moment for the BOJ, though it faces a more ‌challenging task now that it needs to step not just on the accelerator but the brakes," said Naomi Muguruma, chief bond strategist at Mitsubishi UFJ Morgan Stanley Securities. "The BOJ will probably scrutinise upcoming data and market moves in deciding whether to raise rates in December, or hold until January,” Naomi added.

On the Aussie front, Reserve Bank of Australia (RBA) Chief Economist Sarah Hunter on Monday signalled interest rates may need to rise again, warning inflation remains too high and recent price pressures from overseas risk becoming entrenched in Australia.

Yen support tempered as BoJ tightening path remains gradual

Strategists at Brown Brothers Harriman caution that, despite recent support for the Yen, the Bank of Japan is unlikely to accelerate its tightening cycle, with “headline and core CPI inflation tracking below its 2026 projection of 2.5%.” They highlight that market pricing remains measured, noting that “the swaps curve price in just 2% odds of a 25bps BoJ rate hike to 1.50% on October 30, and 80% probability of a hike on December 18,” underscoring expectations for a gradual, data-dependent normalization rather than an abrupt shift in policy.

BoJ’s Himino flags AI-driven inflation risks, keeping Yen bulls

BoJ’s Himino scores 8.2/10 on FXS Speechtracker, matching the historic average and signaling a consistently firm policy tone. Emphasis on strong AI-related capex and exports, rising medium- and long-term inflation expectations, and underlying inflation nearing the 2% target marks a clear hawkish tilt versus the traditional ultra-accommodative stance.

Warnings that postponing policy changes could heighten upside price risks and damage the economy, alongside still-accommodative financial conditions and low real rates, reinforce expectations of gradual normalization. For the Yen, the speech supports a bias toward future tightening, suggesting downside risks for Dollar/Yen if markets bring forward BoJ repricing on sustained inflation and robust bank lending.

Technical Analysis: Negative tone of AUD/JPY remains intact under the 100-day SMA

In the daily chart, AUD/JPY retains a bearish near-term bias as price holds beneath the 100-day simple moving average (SMA) and below the upper Bollinger band. The pair is attempting to stabilize above the Bollinger middle band support, while the Relative Strength Index (RSI) at 47.01 sits just below the neutral 50 line, hinting at subdued recovery momentum rather than a decisive bullish shift.

On the downside, immediate support level is located at the Bollinger middle band at 110.15, ahead of a softer structural floor at the lower Bollinger band around 109.21. A break below this level could expose the October 15 low of 108.64. 

On the topside, initial resistance emerges at the upper boundary of Bollinger band near 111.10, en route to the 100-day SMA at 112.05. Further north, the next hurdle is located at the August 18 high of 113.61. 

(The story was corrected on October 26 at 04:50 GMT to say, in the first bullet point, that AUD/JPY softens to near 110.35 in Monday’s early European session, not Asian session.)