AUD/JPY Price Forecast: Drifts Above 112.50 as Bullish Momentum Fades

The AUD/JPY currency pair edged higher above the 112.50 level during Tuesday’s trading session, extending its recent upward trajectory. However, technical indicators suggest the bullish momentum that has driven the pair over the past several weeks is beginning to fade, raising questions about the sustainability of the current rally.

Technical Analysis: Key Levels in Focus

The pair has been trading in a rising channel since mid-February, with the 112.50 handle emerging as a short-term pivot point. The Relative Strength Index (RSI) on the daily chart has retreated from overbought territory, currently hovering near 68, indicating that buying pressure is waning but not yet exhausted. The Moving Average Convergence Divergence (MACD) histogram has also begun to contract, a classic sign of slowing upward momentum.

Immediate resistance sits at the 113.00 round number, followed by the February high of 113.45. A break above this level could open the door for a test of the 114.00 region, a level not seen since November 2024. On the downside, support is clustered around 112.00, with stronger buying interest expected near the 50-day simple moving average (SMA) at 111.60.

Fundamental Drivers: Divergent Central Bank Policies

The Australian dollar has drawn support from the Reserve Bank of Australia’s (RBA) relatively hawkish stance compared to other major central banks. The RBA has held its cash rate at 4.35% since November, and recent commentary from Governor Michele Bullock has pushed back against expectations of near-term rate cuts. Markets are currently pricing in the first RBA rate cut for late 2025, which has provided a floor under the Aussie.

Meanwhile, the Japanese yen remains under pressure from the Bank of Japan’s (BoJ) ultra-loose monetary policy. Despite the BoJ’s decision to end negative interest rates in March, the central bank has signaled that further tightening will be gradual and data-dependent. The interest rate differential between Australia and Japan continues to favor carry trades, which has been a key driver of AUD/JPY strength.

What This Means for Traders

For forex traders, the fading momentum suggests that the pair may be entering a consolidation phase. Short-term traders should watch for a break above 113.00 or below 112.00 for directional cues. A failure to hold above 112.50 could signal that the uptrend is losing steam, potentially leading to a pullback toward the 111.00 handle.

Position traders, however, may view any dip as a buying opportunity, given the fundamental backdrop. The carry trade remains attractive, and as long as the RBA maintains its hawkish posture, the AUD/JPY trend could remain supportive. However, any unexpected dovish shift from the RBA or a hawkish surprise from the BoJ could quickly alter the pair’s trajectory.

Conclusion

The AUD/JPY pair remains in a technically bullish structure above 112.50, but the fading upside momentum warrants caution. Traders should monitor key resistance at 113.00 and support at 112.00 for the next directional move. The fundamental picture, driven by divergent central bank policies, continues to favor the Australian dollar, but near-term price action suggests a period of consolidation or a modest pullback may be ahead.

FAQs

Q1: What is the current trend for AUD/JPY?
The short-term trend is bullish, with the pair trading above 112.50. However, momentum indicators suggest the pace of the rally is slowing, and a consolidation phase may be developing.

Q2: What are the key support and resistance levels for AUD/JPY?
Key resistance is at 113.00 and 113.45. Key support is at 112.00 and the 50-day SMA near 111.60.

Q3: How do central bank policies affect AUD/JPY?
The RBA’s hawkish stance supports the Australian dollar, while the BoJ’s ultra-loose policy weakens the yen. The interest rate differential makes AUD/JPY attractive for carry trades, which is a major driver of the pair’s upward trend.