AUDJPY Protects Gains, With BoJ and RBA Interest Decisions In the Barrel

Summary:
• The Bank of Japan and Reserve Bank of Australia will announce their interest rate decisions on Monday. Will AUDJPY bulls remain in charge?

The Australian dollar solidified its gains against the Japanese yen on Monday ahead of expected interest rate decisions by both Bank of Japan and Reserve Bank of Australia. The AUDJPY currency pair traded near weekly highs at 97.971. AUD is currently on the front foot, following forecast-beating Chinese industrial production figures.

China is Australia’s largest export market, and a gloomy economic outlook for 2024 brought downward pressure on the Aussie. However, the world’s second-largest economy saw its industrial production increase by 7% year-on-year in February, beating the forecast figure of 53%.  This will likely provide tailwinds for the AUDJPY pair as the market awaits the two key interest rate decisions.

In Japan, the BoJ is largely expected to retain its ultra-low interest rates at least until April. However, some economists expect a raise of between 10 and 20 basis points in Monday’s announcement, on the back of recent improvements in the country’s macroeconomic data.  In the most recent instance, Japan’s economy grew by 0.1% in the fourth quarter of 2023 to beat analysts’ projected decline of -0.1%.

Also, Japan’s largest trade union reached an agreement to raise employee salaries by 5.28% in 2024, the largest in 33 years.  Nonetheless, the BoJ recently warned that consumer spending is still low, and that might inform the need to retain the current interest rate policy. Similarly, the RBA is expected to retain its current 4.25% inflation rate, as a measure to reign in on inflation.

Technical analysis

The sellers are in control of the AUJPY market, as signaled by the RSI indicator. The pivot is at 97.900, and the downside action will continue as long as resistance remains at that level. Prolonged control by the sellers at the pivot will likely break the support at 97.863, and aim for the next support at 97.819. However, possibility for the upside remains if the buyers return the price above 97.900. That could see them build the momentum to break the next resistance at 98.017, enabling them to target 98.053 in extension.