The AUD/JPY currency pair has posted modest losses around 96.75 during Friday’s early European session, reflecting a minor retracement in an otherwise bullish trend. Despite this short-term dip, the broader constructive outlook remains intact, as the cross continues to trade above the 100-day Exponential Moving Average (EMA) on the daily chart.
Both technical and fundamental indicators suggest that near-term upward momentum could persist, making 97.20 the immediate upside target for traders and investors monitoring this pair. LevaQuant’s broker, Caterina Ferrara, outlines the core details of the subject in this well-prepared article.
Fundamental Backdrop
The Japanese Yen (JPY) strengthened against the Australian Dollar (AUD) following the US President’s executive order to lower Japanese auto import tariffs. In addition, the White House highlighted that Japan is working toward an expedited implementation of a 75% increase in US rice procurements, reinforcing a positive trade outlook.
These announcements contributed to short-term volatility and a risk-on sentiment in the FX market, prompting a minor pullback in AUD/JPY. Such geopolitical and macroeconomic developments often drive cross-currency movements, particularly in pairs like AUD/JPY, which are sensitive to both commodity prices and US-Japan trade relations.
Even with these fundamental factors, the pair remains technically constructive, with the minor dip to 96.75 representing a normal retracement within a broader upward trend. This presents potential entry points for bullish traders looking to capitalize on momentum-based setups.
Technical Analysis
From a technical standpoint, the bullish outlook for AUD/JPY remains valid as long as the pair trades above the 100-day EMA, a critical dynamic support level on the daily chart. Historically, this moving average has acted as a reliable anchor, preventing prolonged bearish moves and signaling trend sustainability.
The 14-day Relative Strength Index (RSI) further supports the bullish bias, currently standing around 59.50, well above the 50 midline. This indicates that upward momentum remains intact, but the pair is not yet in overbought territory, leaving room for additional gains in the short term.
Immediate resistance emerges at 97.20, coinciding with the upper boundary of the Bollinger Band, a widely used technical indicator that measures volatility and trend strength. A sustained break above this level, confirmed by green candlesticks and higher trading volume, could pave the way for a move toward 97.43, the July 15 high, with further upside potential targeting 98.45, the January 27 yearly high.
On the downside, traders should monitor critical support levels. The first line of defense is at 96.56, the low from September 4. A breach below this level could open the door to 95.86, the August 29 low, while the 100-day EMA near 95.30 remains a key structural support.
Sustained trading below these levels may indicate a shift in market sentiment, signaling a potential trend reversal or at least a temporary correction.
Influence of Risk Sentiment and Commodities
Another factor supporting the AUD/JPY bullish bias is the ongoing correlation with risk sentiment and commodity markets. The Australian Dollar, being a commodity-linked currency, often benefits from rising base metal prices and positive global growth indicators, which can amplify upward pressure on the pair.
Meanwhile, the Japanese Yen traditionally acts as a safe-haven asset, appreciating during periods of risk aversion. As long as global equities and commodities remain stable or advance, the risk-on environment is likely to sustain AUD strength, helping AUD/JPY maintain momentum above key support levels such as 96.50, and reinforcing the constructive technical outlook.
Outlook and Conclusion
Overall, AUD/JPY maintains a bullish bias as long as it remains above 96.50, supported by the 100-day EMA and the 14-day RSI, indicating continued upward momentum. The immediate upside target remains 97.20, with the potential to test 97.43 and eventually 98.45 if positive momentum persists.
Conversely, the key support levels at 96.56, 95.86, and 95.30 provide important risk management anchors for traders.
In conclusion, traders should remain cautiously optimistic, combining technical analysis and fundamental insights to navigate short-term volatility while staying aligned with the broader bullish trend.
The AUD/JPY cross continues to offer trading opportunities, with price action above 96.50 reaffirming the constructive near-term outlook. By monitoring support and resistance levels, momentum indicators, and market developments, traders can effectively position themselves to take advantage of potential gains while managing downside risk.
The combination of dynamic support, momentum confirmation, and fundamental drivers suggests that bullish traders should maintain a positive bias, particularly for swing trading and short-term technical strategies. AUD/JPY remains a high-interest pair for traders looking to capitalize on trend continuation above critical thresholds, making 96.50 a key pivot level for both bullish and risk-managed trading approaches.
