AUD/JPY Could Explode Higher After RBA Decision: What Traders Need to Know Now
The market is holding its breath under 95.00 as pressure builds on both sides
AUD/JPY hovered just under 95.00 on Monday, settling around 94.79, as traders absorbed incoming tariff chatter and focused on the upcoming Reserve Bank of Australia (RBA) policy announcement. Traditionally viewed as a bellwether for global risk sentiment, this pair is signaling a tight consolidation phase ahead of major catalysts.
With markets fully pricing in a 25 basis point rate cut—from 3.85% to 3.60%—the RBA’s tone is expected to be dovish, possibly laying the groundwork for further easing through year-end. This outlook has seen AUD/JPY settle into a narrow trading range between 94.40 and 95.00, with the 95.00 resistance level gaining renewed significance. A break above could open targets at 97.32 and 99.15, while a slide below key support at 94.65 or even 94.18 could drag the pair toward 93.00.
Global trade tensions added to the mix. U.S. President Trump’s recent announcement of 25% tariffs on Japan and South Korea rattled markets overnight and pushed the yen lower by about 1%. Despite this, AUD/JPY remained resilient, suggesting that risk-on flows continue to favor the Aussie, even amid heightened trade anxiety.
Investors are also weighing the implications of Japan’s falling real wages, which dropped by 2.9% in May—the largest decline in nearly two years. Weaker wage data could keep the yen on the back foot if a global risk rally gains momentum.
What makes the RBA decision pivotal is not just the rate cut itself, but the guidance that follows. If the bank signals further easing, especially citing softer inflation or sluggish growth, a rebound toward 97.00 becomes more likely. On the other hand, a neutral or less dovish stance could reinforce AUD/JPY’s range-bound action.
Core inflation in Australia remains tame around 2.1%, below the RBA’s comfort zone, while GDP growth slowed to just 0.2% in Q1—spurring economists to pencil in up to five rate cuts in 2025. Adding pressure, major lenders like Westpac have questioned any delay in cutting rates, urging the RBA to act decisively to support economic momentum.
In equity and bond markets, investor sentiment is also shifting. U.S. Treasury yields dipped on retreating trade risk, while Australian homebuyers welcomed the potential relief a rate cut could bring—especially with mortgages averaging nearly $500,000, where a 25 bp cut could save about $76 per month.
AUD/JPY remains a prime proxy for the global outlook. A dovish RBA meeting could trigger a rally toward the 97 “ceiling”, while a neutral stance may keep them locked below 95. For forex traders, tomorrow’s policy guidance will be the signal to rotate or reinforce AUD/JPY positions.