AUD/JPY Price Forecast: Softens Below 112.50 as Bearish Pressure Intensifies

The AUD/JPY currency pair has softened below the 112.50 level during early Asian trading on Wednesday, extending its recent decline as bearish momentum continues to build. The cross is currently trading around 112.35, reflecting persistent selling pressure amid a cautious market mood and diverging monetary policy expectations between the Reserve Bank of Australia and the Bank of Japan.

Technical Outlook Turns Negative

From a technical perspective, the breakdown below 112.50 is significant. This level had previously acted as minor support during the pair’s consolidation phase in late March. The failure to hold above it suggests that sellers are gaining control, with the next downside target likely near the 112.00 round figure. Below that, the 111.70 area—representing the low from mid-March—could come into focus.

The daily chart shows the 20-day Simple Moving Average (SMA) crossing below the 50-day SMA, a bearish signal often referred to as a ‘death cross.’ The Relative Strength Index (RSI) has dipped below 45, indicating that bearish momentum is accelerating without being oversold yet. The Moving Average Convergence Divergence (MACD) line has also moved below its signal line, further confirming the negative bias.

Fundamental Drivers Weighing on AUD/JPY

The pair’s weakness is underpinned by several fundamental factors. The Australian dollar has been under pressure following softer-than-expected domestic employment data released last week, which has reduced the likelihood of another rate hike from the RBA in the near term. Meanwhile, the Japanese yen has found support from safe-haven flows amid renewed geopolitical tensions and a slight uptick in Japan’s inflation expectations, which keeps the door open for further Bank of Japan policy normalization.

Impact of Broader Market Sentiment

Risk appetite has deteriorated this week, with equity markets in Asia trading lower. The Australian dollar, often viewed as a proxy for risk sentiment, tends to weaken in such environments. The yen, conversely, benefits from its safe-haven status. This dynamic has created a headwind for AUD/JPY that may persist unless risk sentiment improves markedly.

Traders are now looking ahead to the Bank of Japan’s summary of opinions from its March meeting, due later this week, for any hawkish signals that could further strengthen the yen. On the Australian side, retail sales data for February will be closely watched for signs of consumer resilience or weakness.

Key Levels to Watch

Immediate resistance is now located at 112.50, which has flipped from support to resistance. A recovery above that level could open the door for a retest of 112.80, but the broader bias remains bearish unless the pair can reclaim the 113.00 handle. On the downside, a break below 112.00 would likely accelerate selling toward 111.70 and potentially 111.30.

Conclusion

The AUD/JPY pair is in a clear bearish phase, with technical indicators aligning against it and fundamental drivers offering little support. Unless risk sentiment improves or Australian data surprises to the upside, the path of least resistance appears lower. Traders should monitor the 112.00 level closely as a potential pivot point for the next directional move.

FAQs

Q1: Why is the AUD/JPY pair falling?
The decline is driven by a combination of weaker Australian economic data, reduced expectations for RBA rate hikes, and safe-haven demand for the Japanese yen amid geopolitical uncertainties.

Q2: What is the next key support level for AUD/JPY?
The immediate support is at 112.00, followed by 111.70. A break below these levels could open the door to 111.30.

Q3: Could the AUD/JPY recover soon?
A recovery is possible if risk sentiment improves or if upcoming Australian retail sales data surprises to the upside. However, the current technical and fundamental setup favors further downside in the near term.