AUD/JPY Price Forecast: Softens below 112.50, bearish tone prevails

The AUD/JPY cross trades in negative territory around 112.25 during the early European trading hours on Monday. The Japanese Yen (JPY) strengthens against the Australian Dollar (AUD) amid a renewed push by Japanese authorities for the nation’s massive public pension funds to increase allocations to domestic assets.

"The pension funds are pretty large in size (and) currently, 50 per cent is allocated to foreign investments in their strategic allocation, (so) a shift in that would definitely create a lot more inflows for domestic assets," said Fabien Yip, a market analyst at IG. "That's supportive of the currency and at the same time, also supportive of equities and bonds,” Yip added. 

Technical Analysis:

In the daily chart, AUD/JPY holds a mildly bearish bias as it slips under the Bollinger middle band and consolidates just above the lower half of the recent range. The 20-day Bollinger envelope now caps price action, while the 100-day simple moving average (SMA) around 112.59 remains an underlying trend reference, suggesting that recent weakness is still occurring within a broader uptrend. The Relative Strength Index (14) has eased to about 47, hinting at fading upside momentum without yet indicating oversold conditions.

On the topside, immediate resistance emerges at the Bollinger middle band near 112.35, with further upside barriers seen at the upper Bollinger band around 113.52. On the downside, a move below the recent band floor near 111.15 would expose deeper corrective risk, with the broader trend still anchored by the longer-term 100-day SMA acting as an important demand area on pullbacks.