AUD/JPY Price Forecast: Holds gains above 100.00, overbought RSI warrants caution for bulls

• AUD/JPY edges higher to near 100.05 in Wednesday's early European session.
• The cross keeps the bullish view, but the overbought RSI condition might cap its upside. 
• The key resistance level is seen at 101.56; the initial support level is located at 99.16.

The AUD/JPY cross extends its upside to around 100.05 during the early European session on Wednesday. The Japanese Yen (JPY) faces some selling pressure against the Australian Dollar (AUD) as traders assess the likely policy stance of Japan's next Prime Minister, Sanae Takaichi.

Following Takaichi's victory, traders reduced bets that the Bank of Japan (BoJ) will hike interest rates this month. Takaichi indicated she wants the central bank to proceed cautiously on a rate hike and favors close communication between the central bank and the government. Money market traders are currently pricing in nearly a 26% odds that the BoJ will raise interest rates at its next policy meeting on October 30, down from around 60% before Takaichi's leadership victory, according to Bloomberg.

According to the daily chart, the positive view of AUD/JPY remains in play as the cross is well-supported above the key 100-day Exponential Moving Average (EMA). Nonetheless, the 14-day Relative Strength Index (RSI) stands above the midline near 74.25, indicating the overbought RSI condition. This suggests that further consolidation or a temporary sell-off cannot be ruled out before positioning for any near-term AUD/JPY appreciation.

On the bright side, the first upside barrier for the cross emerges at 101.56, the high of November 20, 2024. Further north, the next hurdle is seen at 102.30, the high of November 8, 2024. A decisive break above this level could pick up more momentum and aim for 103.48, the high of April 26, 2024. 

On the other hand, the initial support level for AUD/JPY is located at 99.16, the low of October 7. Any follow-through selling below this level could expose 98.35, the high of September 15. The crucial contention level to watch is in the 96.45-96.30 zone, representing the 100-day EMA and the lower limit of the Bollinger Band. 

AUD/JPY daily chart