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AUD/JPY Price Forecast: Bulls eye 113.50 as double bottom takes shape
- A double-bottom pattern points to further upside as AUD/JPY advances for a fourth day.
- Above 111.50, a breakout would bring the 50-day SMA and resistance around 112.00 into view.
- The double-bottom measured target of 113.40 could come into play if the breakout is confirmed.
Trading at 111.04, up 0.24%, AUD/JPY is advancing for a fourth consecutive day as bullish momentum builds. The cross has set a fresh monthly high above the 14 October daily high of 111.13 and is nearing key resistance levels.
AUD/JPY Price Forecast: Double Bottom Points to Further Gains
A ‘double bottom’ pattern has emerged in the price action, leaving AUD/JPY poised to break above 111.50. That level sits just below the 50-day simple moving average (SMA) at 111.57.
If the break is decisive, the next level in view would be the 200-day SMA at 111.76, followed by 112.00 and then the 100-day SMA at 112.12. Clearing these key resistance levels would leave buyers targeting the ‘double bottom’ measured move of 227 pips, from around 111.13 to 113.40.
For sellers, the main hurdle on the downside is a fall below 110.00. Only then could AUD/JPY retest the monthly low of 108.64 recorded on 15 October.
AUD/JPY Daily Price Chart
Australian Dollar: Frequently Asked Questions
Interest rates set by the Reserve Bank of Australia (RBA) rank among the most important influences on the Australian Dollar (AUD). Australia's abundant natural resources also make the price of iron ore, its largest export, a key driver. Other influences include the economic health of China, Australia's biggest trading partner, alongside domestic inflation, economic growth and the trade balance. Investor sentiment matters too: a willingness to hold riskier assets, known as risk-on, supports AUD, while a preference for safe havens is described as risk-off.
By setting the interest rate at which Australian banks lend to one another, the Reserve Bank of Australia (RBA) affects borrowing costs across the economy and, in turn, the Australian Dollar (AUD). Its primary objective is to keep inflation stable at 2-3%, raising or lowering rates as needed. When rates are relatively high compared with those of other major central banks, AUD receives support; relatively low rates have the reverse effect. Quantitative easing and tightening provide further ways for the RBA to influence credit conditions. Easing is negative for AUD, whereas tightening is positive.
As Australia's largest trading partner, China has a substantial influence on the value of the Australian Dollar (AUD) through its economic performance. A strong Chinese economy buys more Australian raw materials, goods and services, increasing demand for AUD and lifting its value. When Chinese growth falls short of expectations, the reverse applies. Surprises in China's growth figures, whether positive or negative, therefore often directly affect the Australian Dollar and its currency pairs.
According to 2021 data, iron ore accounts for $118 billion in annual exports, making it Australia's largest export, with China the main destination. This makes iron ore prices a potential driver of the Australian Dollar. A rise in the commodity's price generally increases overall demand for AUD and lifts the currency; falling prices have the opposite effect. Higher iron ore prices also tend to make an Australian trade surplus more likely, providing another source of support for AUD.
Another influence on the Australian Dollar is the trade balance: the difference between a country's export earnings and its import spending. Strong overseas demand for Australian exports can lift the currency simply because foreign buyers create more demand for it than Australia's import purchases generate in the opposite direction. A net trade surplus therefore strengthens AUD, while a trade deficit has the reverse effect.
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