The AUD/JPY currency pair showed modest gains during the early European session on Friday, trading near 95.45, marking a daily increase of 0.24%. 

The pair’s continued resilience above the 100-day Exponential Moving Average (EMA) signals a positive technical outlook, although traders should remain cautious of potential short-term consolidation. ProDivia Group broker Jason Brown offers valuable insights in his article on this topic.

Market Overview

The early bullish momentum in AUD/JPY can be attributed to lingering uncertainty regarding the Bank of Japan’s (BoJ) monetary policy. Market participants continue to speculate about the timing of the next interest rate adjustment, keeping the Japanese Yen (JPY) under pressure. 

This environment provides a tailwind for the Australian Dollar (AUD) against the JPY, encouraging buyers to enter near the 95.45 level.

Technical Analysis

From a technical standpoint, AUD/JPY has resumed its upward bias after reclaiming the key 100-day EMA on the daily chart. This level now acts as a crucial support and a benchmark for assessing the pair’s medium-term trend. 

The 14-day Relative Strength Index (RSI) currently hovers around the midline, indicating neutral momentum. While the uptrend remains intact, traders should not discount the possibility of sideways price action as the market digests recent gains.

The immediate resistance level is positioned in the 96.00-96.10 zone, which aligns with both a psychological barrier and the August 19 high. Should the pair successfully breach this level, a further rally could target 96.75, corresponding to the August 13 high. 

Beyond this, the upper boundary of the Bollinger Band near 97.10 provides another significant technical hurdle for the bulls.

On the downside, any follow-through selling below the 100-day EMA, now at 95.10, could trigger a decline toward 94.40, marking the August 20 low. 

A sustained breach of this level may open the door to 93.97, the July 1 low, followed by 93.36, which represents the June 16 low. These levels serve as critical support zones, where traders may consider entering long positions if the market shows signs of stabilization.

Key Technical Indicators

• 100-Day EMA: Acting as a major trend filter, the EMA now supports the ongoing bullish bias. Traders often use this moving average to gauge medium-term trend strength.
• 14-Day RSI: Currently near the neutral midpoint, the RSI indicates that momentum is balanced, suggesting neither overbought nor oversold conditions. This allows for potential further upside but warns of possible consolidation.
• Bollinger Bands: The upper band near 97.10 represents resistance, while the lower band could act as dynamic support during any corrective moves.

Trading Implications

For short-term traders, AUD/JPY’s performance above the 100-day EMA is an encouraging signal. However, risk management is critical due to the uncertain BoJ policy timeline. Positions could be influenced by sudden JPY strength or AUD weakness stemming from economic data releases in Australia.

Traders aiming for upside targets should monitor the 96.00-96.10 zone for a potential breakout. Successful penetration could lead to 96.75 as the next profit-taking level, with a stretch target of 97.10 aligning with the Bollinger Band resistance. 

Conversely, a failure to hold above the 100-day EMA may invite short-term selling pressure, testing 94.40, with deeper support at 93.97 and 93.36.

Market Drivers

Several factors continue to drive AUD/JPY:

• BoJ monetary policy: Any delay in rate hikes weakens JPY and supports AUD/JPY.
• Australian economic data: Inflation figures, employment data, and GDP growth can influence AUD sentiment.
• Risk appetite: Being a risk-sensitive pair, AUD/JPY reacts to global risk sentiment; bullish risk sentiment often supports AUD strength.
• Technical triggers: Key moving averages, RSI, and Bollinger Bands levels guide trader behavior and entry/exit points.

Conclusion

In summary, AUD/JPY has resumed its upward journey above the 100-day EMA near 95.50, reflecting a positive technical trajectory. While the pair faces immediate resistance around 96.00-96.10, further gains could propel it toward 96.75 and eventually 97.10. 

Traders should watch for short-term consolidation due to neutral momentum indicated by the 14-day RSI. On the downside, the 100-day EMA at 95.10 remains a key support level, with further downside potential toward 94.40, 93.97, and 93.36 if selling pressure persists.

Overall, the technical outlook favors a bullish bias, provided AUD/JPY maintains its footing above the 100-day EMA, supported by positive risk sentiment and continued JPY weakness. Traders should combine technical signals with fundamental drivers to navigate potential volatility in this key FX pair.