Yen Strength Leads FX Ahead of BOJ, Fed: USD/JPY, AUD/JPY, AUD/USD

The Japanese yen led the majors higher on Tuesday, supported by comments from Japanese officials and US Trade Secretary Scott Besset that eased fears of excessive fiscal stimulus from Japan’s new government. While the Bank of Japan (BOJ) is still expected to hold rates steady at 0.25%, Reuters reports policymakers may shift their focus toward future hikes — signalling a potential hawkish tilt.

Meanwhile, the Australian dollar was the second-strongest performer, with AUD/USD extending its rally on improved risk sentiment following constructive US trade talks with China and Japan, and hawkish remarks from Reserve Bank of Australia (RBA) Governor Michelle Bullock. She cautioned that a quarterly CPI print of 0.9% could derail expectations for a rate cut next week, sending RBA futures pricing for a 25bp cut down to 39% from 61%.

View related analysis:

Chart prepared by Matt Simpson - data source: LSEG

Yen Strength Dominates FX as BOJ, RBA and Fed Loom

USD/JPY Technical Analysis: US Dollar vs Japanese Yen

Tuesday’s selloff signals a clear shift in momentum for USD/JPY, marking a confirmed double top around 153.28. The prospect of a stronger Japanese yen from this week’s Bank of Japan (BOJ) meeting, combined with potential US dollar weakness should the Federal Reserve adopt a dovish tone, could pave the way for further downside in USD/JPY heading into next week.

While the pair has found temporary support around its 10-day EMA and the weekly VPOC (volume point of control), a potential bear flag pattern is emerging on the 1-hour chart. Given the bearish momentum shift, traders may look to fade minor rallies within Tuesday’s range or wait for a decisive break below yesterday’s low to confirm continuation.

The next downside target sits near 151.00 at the weekly S1 pivot, with a break below this level bringing the key 150.00 handle into focus.

Chart analysis by Matt Simpson - data source: TradingView USD/JPY

AUD/JPY Technical Analysis: Australian Dollar vs Japanese Yen

Another yen pair to watch is AUD/JPY heading into today’s Australian CPI data. I suspect the figures won’t reach the 0.9% q/q threshold highlighted by RBA Governor Michelle Bullock — a result that could keep hopes of a rate cut alive next week and weigh on the Australian dollar.

A hammer candle has formed on the daily chart around the 100 handle, with Monday and Tuesday’s highs resembling a tweezer top (or a potential double top on lower timeframes). While there may be some wriggle room around this week’s highs, bears will likely look for confirmation of a false break above the tweezer top as a cue for a leg lower towards the January high near 99.17. A sustained move below 99.00 would open the door to a deeper pullback.

That said, a combination of softer Australian inflation and a hawkish Bank of Japan (BOJ) outcome would likely be needed to fuel a larger correction — unless broader risk-off sentiment provides an additional catalyst.

Chart analysis by Matt Simpson - data source: TradingView AUD/JPY

AUD/USD Technical Analysis: Australian Dollar vs US Dollar

Bulls remain firmly in control of AUD/USD, which is currently enjoying its best two-day rally in six weeks. However, with the Aussie nearing a cluster of resistance levels — and with CPI data unlikely to completely rule out an RBA cut next week — I’m leaning toward a short-term pullback.

The October VPOC, weekly R3 pivot, and monthly pivot point all converge just below 0.66. The fact that AUD/USD has reached its weekly R3 pivot in only two sessions also suggests the rally may be overstretched.

That said, I’m not anticipating a large sell-off by any means. But if the data cooperates, the Aussie could at least retrace toward its 1-hour 20- or 50-bar EMA to form a swing low and potentially offer bulls another opportunity to rejoin the trend.

Chart analysis by Matt Simpson - source: TradingView AUD/USD

Key Economic Events for Traders (AEDT / GMT+11)

All Day Holiday Hong Kong – Chung Yeung Day (HKD, Hang Seng Index)
07:30 USD API Weekly Crude Oil Stock (WTI Crude, Brent Crude, USD/CAD)
11:30 AUD CPI, Trimmed Mean, Weighted Mean (Q3) (AUD/USD, AUD/JPY, ASX 200)
16:00 JPY Household Confidence (Oct) (USD/JPY, EUR/JPY, Nikkei 225)
18:00 NOK Core Retail Sales (Sep) (USD/NOK, EUR/NOK, Brent Crude)
20:00 CHF ZEW Expectations (Oct) (USD/CHF, EUR/CHF, SMI Index)
20:30 GBP Monetary & Credit Data: M3, M4, Mortgage Approvals, Net Lending (Sep) (GBP/USD, EUR/GBP, FTSE 100)
21:30 EUR German 10-Year Bund Auction (EUR/USD, EUR/GBP, DAX)
23:30 USD Goods Trade Balance, Retail & Wholesale Inventories (Sep) (S&P 500, Nasdaq 100, USD/JPY)
00:45 CAD BoC Interest Rate Decision, Policy Report & Statement (USD/CAD, CAD/JPY, S&P/TSX)
01:30 USD EIA Weekly Petroleum Report: Crude, Gasoline, Distillates, Refinery Utilization (WTI Crude, Brent Crude, USD/CAD)
01:30 CAD BoC Press Conference (USD/CAD, CAD/JPY, S&P/TSX)
02:30 USD Atlanta Fed GDPNow (Q3) (S&P 500, Nasdaq 100, USD/JPY)
05:00 USD FOMC Statement & Fed Interest Rate Decision (S&P 500, Nasdaq 100, USD/JPY)
05:30 USD FOMC Press Conference (S&P 500, Nasdaq 100, USD/JPY)

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

FOREX.com is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment and CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.forex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.forex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 42.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.

Delayed London Stock Exchange (LSE) Data

The London Stock Exchange (LSE) market data displayed or referenced on this website is provided on a delayed basis and is not in real time. The delay period may vary but is typically at least 15 minutes. This data is intended for information purposes only and should not be relied upon for trading, investment, or other financial decisions. We do not guarantee the completeness, reliability, or suitability of the data for any particular purpose. Users should consult real-time data sources and obtain professional advice before making any financial decisions.