AUD/JPY. Analysis and Forecast

[Redator]

At the start of the new week, the AUD/JPY pair opened with a bullish gap, partially offsetting Friday's decline of more than 250 points.

Domestic political instability in Japan is undermining the yen's status as a safe-haven asset and has become an important factor driving the pair higher. The Komeito Party has ended its 26-year coalition with the ruling Liberal Democratic Party (LDP), jeopardizing Sanae Takaichi's ambitions to become Japan's first female prime minister. This adds uncertainty and could delay the Bank of Japan's plans to raise interest rates.

Meanwhile, Donald Trump backed away from his threat to impose 100% tariffs on Chinese imports starting November 1, stating on his Truth Social account that the U.S. does not want to harm China. He added that China's economy will be fine and that both countries seek to avoid serious losses. These comments helped ease fears of an escalation in the U.S.-China trade conflict, improving risk sentiment, weighing on the yen, and creating favorable conditions for the Australian dollar, which often serves as a proxy currency for China.

Despite this, Chinese trade data had little impact on the pair's bullish momentum. In September, China's trade surplus fell to 645.47 billion yuan, down from 732.7 billion in the previous month. Meanwhile, imports rose 7.5% year-over-year, surpassing expectations of 1.7%, and exports increased 8.4% compared to 4.8% in July.

The Australian dollar also received additional support from the hawkish tone of the Reserve Bank of Australia (RBA). The central bank indicated that inflation in the third quarter could exceed forecasts made during its August meeting. Furthermore, the RBA emphasized the need for additional time to assess the effects of the 75 basis-point rate cuts implemented in 2025. These statements strengthen expectations of further appreciation in the AUD/JPY pair, although speculation about a potential Bank of Japan rate hike in the coming months may limit the upside.

From a technical standpoint, the oscillators on the daily chart remain positive, and the 9-day EMA is above the 14-day EMA, confirming a bullish outlook.

However, for a stronger bullish confirmation, prices must break above the 99.00 psychological level, followed by resistance near 99.37, paving the way toward the key psychological level at 100.00.

The pair has found support at the 14-day EMA, with the next support level seen around 98.45. A move below this level would invalidate the bullish outlook and could push prices down toward the 98.00 round level, below which bearish momentum would likely intensify.

The material has been provided by InstaForex Company - www.instaforex.com