• AUD/JPY is trading below a new monthly high reached earlier on Tuesday.
• Due to the mixed technical configuration, some caution is advised before positioning for further gains.
• Sustained strength beyond the 100 mark is seen as a new trigger for the bulls.

The AUD/JPY pair has been fluctuating between modest gains and minor losses in the first half of the European session and now appears to have stabilized around the mid-98.00 level, just below the monthly high reached earlier on Tuesday.

The Japanese Yen (JPY) continues its volatile price action in both directions amid uncertainty over domestic political uncertainty in the region. This could hamper the Bank of Japan’s (BoJ) plan to continuously hike interest rates from near-zero levels. This, in turn, is not helping the AUD/JPY pair build on the modest gains made overnight and is leading to muted, range-bound price action. Nevertheless, the prevailing risk appetite continues to undermine the safe-haven JPY, which, along with the Reserve Bank of Australia’s (RBA) hawkish stance, is providing tailwinds to the currency pair.

From a technical perspective, the AUD/JPY pair is holding comfortably above the 38.2% Fibonacci retracement level of the July-August decline. This, in turn, supports the prospects of a continuation of the recent strong recovery from near the psychological level of 90.00, or the lowest level since May 2023, reached earlier this month. However, mixed oscillators on the daily chart require some caution for bullish traders. Therefore, any subsequent upside is more likely to remain capped near the confluence resistance of 100.00.

The said level includes the very important 200-day SMA (Simple Moving Average) and the 50% Fibo level, which if decisively overcome will be seen as a new trigger for bullish traders. The AUD/JPY pair could then accelerate the positive move towards the 101.00 mark before attempting to test the supply zone of 102.00-102.10 or the 61.8% Fibo level.

On the downside, the 97.45 area (38.2% Fibo level) now seems to have emerged as an immediate strong support. This is followed by the 97.00 round number and support near the 96.30-96.25 region. Some follow-through selling below the 96.00 mark could expose the 23.6% Fibo level around the 94.65 region, with intermediate support near the 95.55 horizontal zone and the 95.00 psychological mark.

AUD/JPY daily chart