Australian CPI Inflation Beat Boosts RBA Rate Hike Bets as AUD/JPY Rallies Near 114.50

Hotter-than-expected Australian July CPI data has sharply raised market expectations for a Reserve Bank of Australia rate hike, propelling AUD/JPY toward 114.50 above its 100-day SMA.

The Australian Dollar gathered substantial momentum against the Japanese Yen during early European trading hours, with the AUD/JPY cross advancing toward 114.45. This strong upside movement follows the release of Australian Consumer Price Index inflation figures that came in higher than market consensus. The inflationary print has driven traders to rapidly reprice expectations for monetary policy tightening by the Reserve Bank of Australia (RBA). From a technical perspective, AUD/JPY maintains a firm bullish stance as long as price action trades above the critical 100-day Simple Moving Average (SMA).

Hotter Australian CPI Triggers Repricing of RBA Rate Hike Path
Data published by the Australian Bureau of Statistics revealed that monthly CPI inflation accelerated by 1.0% in July, rebounding from a 0.1% contraction recorded in June and comfortably beating market forecasts of a 0.8% increase. The unexpected spike in headline consumer prices highlights persistent inflationary pressures within the domestic economy, prompting fixed-income and currency traders to adjust their interest rate projections for the central bank.

Following the data release, money markets assigned a 38% probability to an RBA interest rate hike at its September meeting, a sharp jump from the 17% probability priced in prior to the report. Furthermore, market participants have now fully priced in a 25-basis-point rate increase by February of next year. The prospect of a fourth rate hike from the Australian central bank within the current cycle has significantly bolstered the yield appeal of the Australian Dollar relative to low-yielding peers.

Bank of Japan Policy Outlook and Deputy Governor Himino's Comments
On the Japanese Yen side of the equation, Bank of Japan (BoJ) Deputy Governor Ryozo Himino reiterated the central bank's commitment to adjusting monetary accommodation if economic activity and inflation align with projections. Speaking on economic conditions, Himino emphasized the necessity of timely rate hikes to counter mounting inflation risks, acknowledging dominant market sentiment pointing toward near-term increases in borrowing costs.

However, Deputy Governor Himino abstained from giving explicit guidance regarding the exact timing of the BoJ's next policy move. He noted that the central bank must conduct in-depth deliberations on price dynamics at each upcoming policy meeting. The long-standing monetary policy divergence between the BoJ and other major central banks over the past decade caused severe Yen depreciation, but the gradual unwinding of ultra-loose settings has provided structural support for the Japanese currency.

AUD/JPY Technical Analysis: Key Indicators and Price Levels
On the daily chart, the AUD/JPY cross continues its upward trajectory above both the 100-day SMA at 113.20 and the 20-day Bollinger middle band near 112.55. This technical configuration reinforces a constructive bullish bias. Price action is currently pushing against the upper boundary of the Bollinger Band framework.

The 14-day Relative Strength Index (RSI) stands at 64.33, remaining firmly in positive territory. This indicates that buying pressure remains robust, although the indicator is gradually approaching overbought territory.

To the upside, immediate technical resistance is identified around the 115.00 level, coinciding with the upper Bollinger Band where supply may temporarily cap gains. A sustained breakout above 115.00 would open the door for an extension toward the 115.50 psychological barrier.

On the downside, initial support is anchored at the August 24 low of 113.60, followed closely by the 100-day SMA at 113.20. A decisive breakdown below 113.20 could trigger a broader pullback toward the 20-day middle band at 112.55, with deeper structural support located near the lower Bollinger Band around 110.15.

Broader FX Markets: Movements in GBP, EUR, and KRW
Across the broader currency markets, the US Dollar demonstrated renewed strength, exerting downward pressure on major pairs. GBP/USD reversed its previous session gains, retreating below the 1.3600 handle as market participants evaluated macroeconomic data releases and ongoing geopolitical developments.

Similarly, EUR/USD experienced fresh selling pressure, slipping toward the mid-1.1600 region. Traders maintained a cautious stance ahead of the European Central Bank accounts publication and Federal Reserve Chair Kevin Warsh's scheduled address at the Jackson Hole Symposium.

In Asian currency trading, the South Korean Won appreciated 0.3% against the greenback, driving USD/KRW down toward 1,380. The Won revisited 11-month highs, supported by sequential policy rate increases implemented by the Bank of Korea.

Cryptocurrency Market Maintains Upward Momentum
In digital asset markets, sentiment remained constructive despite US July Personal Consumption Expenditures (PCE) inflation figures landing slightly above expectations. Bitcoin (BTC) preserved its bullish posture, holding securely above the $78,000 price mark.

Altcoins also recorded notable gains, with tokens such as SPX6900 (SPX) and VeChain (VET) leading market advances with double-digit percentage surges over a 24-hour period.

What this means for you
This development carries direct practical implications for forex traders, international investors, and global market participants.

• For Forex Traders: The sharp repricing of RBA rate hike expectations creates heightened volatility and tactical breakout opportunities in AUD cross-pairs near key resistance levels.
• For Global Investors: Widening yield differentials favor Australian Dollar-denominated assets, encouraging capital reallocation toward higher-yielding sovereign paper.
• For International Travelers and Students: A strengthening Australian Dollar against peer currencies implies higher living, tuition, and travel expenses within Australia.
• For Crypto Asset Holders: Bitcoin's ability to hold above $78,000 despite firm US PCE inflation signals resilient risk sentiment across speculative markets.

Questions & Answers

1. What is driving the recent rally in AUD/JPY?
The rally is primarily driven by Australia's July CPI inflation coming in at 1.0%, exceeding expectations and strengthening bets for an RBA interest rate hike.

2. What is the probability of an RBA rate hike in September?
Following the inflation data, market pricing for an RBA interest rate hike in September increased from 17% to 38%.

3. What stance has the Bank of Japan taken on interest rates?
BoJ Deputy Governor Ryozo Himino emphasized the need for timely rate hikes due to inflation risks but refrained from specifying the exact timing of the next increase.

4. What are the key technical levels to watch for AUD/JPY?
Immediate resistance lies near 115.00 and 115.50, while key support levels are located at 113.60 and the 100-day SMA at 113.20.

5. How is the cryptocurrency market performing alongside these FX moves?
The crypto market remains bullish with Bitcoin holding above $78,000, while altcoins like SPX6900 and VeChain recorded double-digit gains.

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