AUD/JPY Price Forecast: Weakens to near 111.00 as bearish technical bias holds below 100-day SMA
- AUD/JPY declines to near 111.10 in Friday’s early European session.
- The negative outlook of the cross remains intact, with bearish RSI momentum.
- The first upside barrier emerges at 111.70; the initial support level to watch is 110.00.
The AUD/JPY cross attracts some sellers to around 111.10 during the early European session on Friday. The Japanese Yen (JPY) edges higher against the Australian Dollar (AUD) as traders remain on high alert for currency intervention from Japanese authorities.
US President Donald Trump shared his concerns over the Yen’s weakness during a meeting with Japanese Prime Minister Sanae Takaichi earlier this week in New York. Japanese Finance Minister (FM) Satsuki Katayama said that excessive currency moves harm the economy and intervention should be kept as an option to address such volatility.
After the Bank of Japan (BoJ) raised the policy rate to 1.25% last week, Governor Kazuo Ueda signaled he was open to further tightening, saying he wouldn’t rule out a back-to-back hike in October or a larger move at some point. However, the move was viewed as insufficiently hawkish, with two officials dissenting from the decision.
Meanwhile, the benchmark 10-year Japanese Government Bond (JGB) yields have surged to a 30-year high above 3%. Traders remain reluctant to commit heavily to domestic bonds while yields are still climbing and policymakers offer few clues about how much further rates must rise.
On the Aussie front, the market is widely expecting a 25-basis-point rate hike from the Reserve Bank of Australia (RBA) next week, and Thursday’s slight unemployment increase is unlikely to stay the RBA’s hand.
US pressure on BoJ and Japan’s defence pivot sharpen focus on Yen carry trade
Analysts at Rabobank highlight what they see as intensifying US strategic pressure on Japan’s monetary stance, pointing to “the US Treasury openly pushing the ‘independent’ BoJ to end the Yen Carry Trade via rate hikes, threatening a perfect storm for some assets, in exchange for a strong JPY, cheaper commodity imports, and more Japanese domestic investment into defence industries” as a key example of this shift. They add that the broader geopolitical backdrop is becoming more sensitive for Tokyo, noting that, as the Financial Times warns in a related context on middle powers, “The threat of appearing as a vassal state is growing ever more real for middle powers.”
Technical Analysis: AUD/JPY retains a negative tone below the 100-day SMA
In the daily chart, AUD/JPY maintains a bearish near-term tone as it holds beneath the Bollinger middle band and the 100-day simple moving average (SMA). Price is closer to the lower half of the Bollinger envelope, while the 14-period Relative Strength Index (RSI) around 41.70 hints at soft but not extreme downside momentum, reinforcing the view that rallies remain capped by overhead levels rather than signaling a fresh bullish phase.
On the topside, initial resistance level aligns with the Bollinger middle band at 111.70, en route to the 100-day SMA at 112.80. A more distant barrier emerges at the Bollinger upper band near 114.18.
On the downside, the first meaningful support is defined by the 110.00 psychological level. A breach of this level could expose the September 14 low of 109.67, followed by the lower limit of Bollinger band at 109.20. Only a sustained break above the 100-day SMA would start to relieve the prevailing bearish bias.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.