On Wednesday, the AUD/JPY pair is attracting buyers, even though the Japanese yen remains relatively weak due to domestic political uncertainty. Moreover, according to polls, Japan's ruling coalition—the Liberal Democratic Party (LDP) and Komeito—may lose its majority in the upcoming upper house elections scheduled for July 20. This would increase fiscal and political risks in the country, complicating trade negotiations amid looming U.S. tariff measures on Japanese exports.

In light of these factors, the downside for the AUD/JPY pair appears limited.

Additional contributing factors include Japan's slowing economic growth, declining wages, and signs of easing inflationary pressure—all of which may further complicate the Bank of Japan's efforts to normalize monetary policy.

This supports the yen's continued weakness, thereby limiting the downside for AUD/JPY. At the same time, the Reserve Bank of Australia's (RBA) recent decision to leave interest rates unchanged earlier this month is expected to have a positive effect on the Australian dollar and reinforce its near-term strengthening outlook.

For better trading opportunities, it's worth monitoring Australia's employment data, which will be released during Thursday's Asian session. Another key event will be the publication of Japan's national Consumer Price Index (CPI) report on Friday, which could significantly contribute to a potential rally in the AUD/JPY pair toward the end of the week.

From a technical standpoint, as long as the Relative Strength Index (RSI) on the daily chart remains in oversold territory, the pair is likely to consolidate and correct. If it breaks through the psychological level of 97.00, the next resistance lies at 97.35. A firm break above this level would open the way for a test of the January 2025 high.

The pair has found support for the current correction at the 50-hour SMA, with the next support level at the 100-hour SMA, just above 96.55. A correction below this level is also possible and would not be critical for the pair's broader upward trend.