The AUD/JPY cross trades in negative territory around 110.60 during the early European trading hours on Thursday. Hawkish remarks from Japanese authorities provide some support to the Japanese Yen (JPY) against the Australian Dollar (AUD).
Bank of Japan (BoJ) Deputy Governor Ryozo Himino said on Wednesday that underlying inflation is moving securely toward the central bank’s 2% target. Earlier on Monday, BoJ Governor Kazuo Ueda stated that underlying inflation is near the 2% target. He further stated that if the bank raises the short-term policy rate, long-term interest rates are likely to rise steadily with policy.
Reserve Bank of Australia (RBA) monetary policy board member Andrew Hauser said on Wednesday that the inflation outlook is materially worse than the bank had forecast. The odds of an interest rate increase in the November policy meeting climbed from 30% before Hauser’s comments to 45%, according to the Guardian.
Japan export momentum extends despite softer-than-expected gainsAnalysts at Deutsche Bank note that early data for September showed a further solid performance from Japan’s external sector, with exports rising by “+16.7% in September compared to the same month last year,” supported by “robust demand for semiconductors and AI-related products that continued to support growth.” They highlight that this “marked the 13th consecutive month of gains following a 9.3% rise in August,” even though the latest print fell short of “expectation of a +21.3% increase.” On the import side, Deutsche Bank points out that “imports rose by +18.9% y/y, falling short of the forecast of a +20.4% increase,” and that this softer outcome helped narrow the external shortfall, with “a decrease in imports” contributing to a reduction in Japan’s trade deficit “to -536.6 billion yen in September from -1.11 trillion yen in the previous month.”
Technical Analysis: AUD/JPY holds a modestly bearish outlook below the 100-day SMAIn the daily chart, AUD/JPY keeps a modestly bearish bias, holding below the longer-term 100-day simple moving average (SMA) while trading above the 20-day Bollinger SMA, suggesting a capped recovery within a broader corrective context. The Relative Strength Index (RSI) hovers around 50, hinting at neutral momentum and reinforcing the view of consolidation rather than a decisive bullish reversal as long as overhead resistance remains intact.
On the topside, initial resistance level emerges at the upper Bollinger band around 111.15, en route to a stronger barrier at the 100-day SMA near 112.10. A desicive break above this level could see a rally to the June 16 high of 113.55 and then the July 27 high of 114.67.
On the downside, immediate support level is seen at the 20-day Bollinger midline around 110.20, followed by the 110.00 psychological level. Further south, the next contention level to watch is the lower limit of Bollinger band near 109.20, where a break lower would reopen the door to deeper losses.
(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.
The AUD/JPY surges for the fourth straight day and approaches key resistance levels as bulls gather momentum, hitting a new monthly high above the October 14 daily high of 111.13. The cross-pair trades at 111.04, up 0.24%.
Price action shows that a ‘double bottom’ chart pattern has formed, with AUD/JPY poised for a breakout above 111.50, slightly below the 50-day Simple Moving Average (SMA) of 111.57.
A decisive break opens the door for a move towards the 200-day SMA at 111.76 ahead of 112.00. Up next is the 100-day SMA at 112.12. Once those key resistance levels are taken out, bulls' next target is the ‘double bottom’ measured target objective of 227 pips, from around 111.13 to 113.40.
On the downside, the most difficult part is that the AUD/JPY must drop below 110.00 for sellers to retest the monthly lows reached on October 15 at 108.64.
Australian Dollar FAQs One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
The AUD/JPY cross attracts some follow-through buyers for the second straight day on Monday, recovering further from an eight-month low, around the 108.65-108.60 region, touched last week. Spot prices climbed back above the 110.00 psychological mark during the Asian session amid a combination of supporting factors.
The Australian Dollar (AUD) gets a minor lift in reaction to Reserve Bank of Australia (RBA) Assistant Governor Chris Kent's hawkish remarks and China's better-than-expected Gross Domestic Product (GDP), showing that the economy expanded by 4.5% YoY in the third quarter. The Japanese Yen (JPY), on the other hand, is undermined by cautious Bank of Japan (BoJ) expectations, acting as a tailwind for the AUD/JPY cross. Traders, however, remain on high alert that Japanese authorities might step in again to prop up the domestic currency. This, in turn, warrants some caution for bullish traders.
From a technical perspective, spot prices retain a bearish near-term bias beneath the 200-period Simple Moving Average (SMA) on the 4-hour chart and a dense Fibonacci retracement band overhead. This, in turn, suggests that rallies could be sold into despite a mildly constructive backdrop from the Relative Strength Index around 52 and a modestly positive Moving Average Convergence Divergence (MACD) reading. The AUD/JPY cross currently trades just under the 38.2% retracement at 110.17, and the next relevant hurdle is pegged near the 50.0% level at 110.63 ahead of the 200-period SMA at 110.93.
Further up, the 61.8% retracement at 111.10 could cap the currency pair ahead of 111.76 and 112.61. On the downside, immediate support is seen at the 23.6% retracement near 109.59, with a break below exposing the recent swing low around 108.66 as the next significant bearish target.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
AUD/JPY 4-hour chart
Economic Indicator
Gross Domestic Product (YoY)
The Gross Domestic Product (GDP), released by the National Bureau of Statistics of China on a monthly basis, is a measure of the total value of all goods and services produced in China during a given period. The GDP is considered as the main measure of China’s economic activity. The YoY reading compares economic activity in the reference quarter compared with the same quarter a year earlier. Generally speaking, a rise in this indicator is bullish for the Renminbi (CNY), while a low reading is seen as bearish.
The Australian dollar is showing signs of vulnerability against the US dollar and Japanese yen, with bearish inverted hammer candles emerging on both AUD/USD and AUD/JPY. A potential swing high near 70c on AUD/USD adds to the downside risks ahead of Australia's employment report, particularly if unemployment rises faster than the RBA expects.
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While we have time on our sides to see if that is indeed a large head and shoulders top in play on the weekly charts, AUD/USD is setting up for a potential swing high around 70c.
The daily chart shows a volatile inverted hammer formed on the daily chart, with a false break of its 20—day EMA and the 20-day capping the daily high as resistance. With a high-to-low range of 0.9%, it marked a 1-standard deviation range and its most volatile in eight. The face it still closed lower despite much of that range being earlier in the day plays to the advantage of bears, as it could realign momentum with the higher-timeframe head and shoulders pattern.
For now, perhaps we’re simply looking for a move down to 69c near its October low.
Source: ICE, TradingView
AUD/JPY Technical Analysis: Australian Dollar vs Japanese Yen
A similar setup may be emerging on AUD/JPY, though the daily chart doesn’t quite have the same bearish structure as AUD/USD. But the daily chart does also show an inverted hammer candle – with its most volatile daily range in seven.
The 200-day EMA is supporting for now, though a break of its also invalidates yesterday’s low for bears to assume bearish continuation.
A cluster of historical resistance levels including the 191 and 2024 highs make potential support levels over the near term, or intraday day targets for bears. But we need to see a clear break of the March and October low (108.78) before assuming bears have truly regained control. But if they do, the next major support level is the December VPOC near 106.52.
Source: ICE, TradingView
Australian Employment Report Could Pressure AUD/USD Bulls
Australia’s labour force report lands in a few hours. We know the RBA has retained a hawkish tone and that policymakers are concerned inflation may be more broad-based than simply high energy prices. This places CPI reports front and centre, though employment still matters to a degree.
Moreover, unemployment has been rising at a faster pace than the RBA’s own forecasts, so an unemployment rate of 4.7% or higher could cause further issues for Australian dollar bulls. And while job growth has been positive, part-time employment has been the main driver, while full-time employment has been slightly negative.
So the ideal scenario for AUD/USD bears is a rising unemployment rate alongside negative full-time job growth, with a contraction in headline employment being the cherry on top.
The AUD/JPY cross comes under some renewed selling pressure on Tuesday and retreats further from the 110.65 resistance zone, retesting the previous day. Spot prices slide to a fresh daily low during the early European session, with bears now awaiting a break below the 110.00 mark before positioning for further losses.
Traders remain on high alert amid speculation that Japanese authorities will step in to prop up the domestic currency. Adding to this, firming expectations for further policy tightening by the Bank of Japan (BoJ) provide a modest lift to the Japanese Yen (JPY), which, in turn, is seen as a key factor exerting pressure on the AUD/JPY cross. Meanwhile, the Australian Dollar (AUD) benefits from a modest US Dollar (USD) pullback from an 18-month peak and might help limit the downside for the currency pair.
From a technical perspective, spot prices keep a bearish intraday bias following the overnight rejection around the 100-period Simple Moving Average (SMA) on the 4-hour chart. Moreover, Moving Average Convergence Divergence (MACD) remains below zero with a negative reading of -0.03, and the Relative Strength Index (RSI) at 48.48 stays neutral, hinting that downside pressure is present but not yet overstretched. This, in turn, validates the near-term negative outlook for the AUD/JPY cross.
That said, some follow-through selling and acceptance back below the 23.6% Fibo. level and the 110.00 psychological mark is needed to back the case for deeper losses to the structural floor at 108.73. On the topside, initial resistance is seen at the 100-period SMA at 110.58, followed by the 38.2% Fibo. level at 111.12 and the 200-period SMA at 111.42, before the 50.0% retracement at 111.85 and the 61.8% level at 112.59 come into play. Higher up, the 78.6% retracement at 113.64 and the cycle high at 114.98 mark a broader cap.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
AUD/JPY 4-hour chart
Japanese Yen Price Today The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the US Dollar.
USDEURGBPJPYCADAUDNZDCHFUSD-0.30%-0.19%-0.27%-0.12%-0.10%-0.27%-0.21%EUR0.30%0.10%0.02%0.18%0.17%0.03%0.09%GBP0.19%-0.10%-0.10%0.04%0.07%-0.09%-0.01%JPY0.27%-0.02%0.10%0.15%0.16%-0.01%0.07%CAD0.12%-0.18%-0.04%-0.15%0.01%-0.16%-0.08%AUD0.10%-0.17%-0.07%-0.16%-0.01%-0.16%-0.10%NZD0.27%-0.03%0.09%0.00%0.16%0.16%0.08%CHF0.21%-0.09%0.00%-0.07%0.08%0.10%-0.08% The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
AUD/JPY retested the 110.50 level after securing four daily gains, driven by renewed appetite for risk-sensitive assets and technical buying. Cautious Bank of Japan communications reduced near-term rate hike expectations, while sticky Australian inflation keeps RBA rate hike risks plausible. Key risks that could reverse gains include stronger Japanese data, hawkish BoJ signals, weaker commodities or a broad risk-off move favouring the yen. The AUD/JPY currency pair has fluctuated this week. The Australian dollar gained against the Japanese yen in four of the last six trading sessions, and after two straight declines, AUD/JPY approached the 110.50 level during the Asian trading session.
Is this recent upward movement a sustained recovery, or just a temporary pause before a potential decline?
Why Buyers Are Returning Signals from the Bank of Japan (BoJ) are bringing buyers back. Even though the BoJ hiked interest rates in September, markets found its guidance less aggressive than expected.
Comments from Governor Ueda on Tuesday and statements from board member Ayano Sato, who advocated for a gradual approach to monetary policy tightening, suggest that borrowing the yen may remain inexpensive for now.
Markets now price in a much lower chance of an October rate hike from the BoJ, now around 12% compared to last week’s 40%. This shift has lowered immediate demand for the yen, potentially prompting carry traders to rebuild long positions in the Australian dollar.
Australia’s higher interest rate differential also provides ongoing fundamental support for the Australian dollar. The Reserve Bank of Australia (RBA) has kept a tighter monetary policy than the BoJ, which gives the Australian dollar a yield advantage.
Is the Upside Momentum Sustainable? This upside momentum, however, needs more confirmation to prove sustainable. While buyers did push the pair back above the 110.00 psychological level, it’s still below its 100-day Simple Moving Average (SMA) near 112.45.
Short-term technical indicators, like the Relative Strength Index (RSI) on lower timeframes, look overbought. For this uptrend to continue, we’d need a clear daily close above 111.00.
Fundamentally, the interest rate differential and the BoJ’s cautious stance offer some support. But these gains will need ongoing confirmation to stick.
If Japanese monetary policy stays gradual and Australian economic data holds up, the pair might extend its recent climb. Yet, the broader technical picture suggests sellers could keep pushing down on rallies until it breaks past key moving averages.
Potential Disruptors Ahead Several factors could disrupt the current rebound. Any hint of a more hawkish shift from the BoJ or stronger Japanese economic data could reignite rate hike expectations and strengthen the yen.
Reports suggest President Trump discussed concerns about yen weakness with Prime Minister Takaichi, sparking talk of a possible joint US-Japan intervention. This kind of intervention would directly oppose yen weakness, and it could happen with little warning.
On the Australian side, given Australia’s heavy reliance on raw material exports to China, any unexpected weakening in Chinese manufacturing or industrial output would hurt the Australian dollar.
A general move towards risk aversion in global markets also often sends investors to the yen as a safe-haven, potentially pushing AUD/JPY lower. So, we’ll need to watch upcoming central bank meetings and key economic data releases closely.
What’s driving the recent buying interest in AUD/JPY?
Softer comments from the Bank of Japan have reduced the odds of an October rate hike to about 12%, weighing on the yen. Meanwhile, Australia’s higher yields continue to support the Australian dollar.
What could disrupt the current recovery?
The key factors that could disrupt recovery include stronger Japanese economic data, more hawkish signals from the BoJ, weakness in commodity prices, or a broad move to risk aversion that strengthens the yen as a safe haven.
What’s the main technical resistance limiting AUD/JPY’s immediate gains?
The 100-day Simple Moving Average near 112.45 is a significant overhead resistance. It’s currently capping any bigger upward moves.
AUD/USD maintains strong relationships with global cyclical equities
VIX futures influential in recent Aussie price action
AUD/JPY tracking Australian–Japanese yield spreads more closely
Contrasting technical formations put both crosses on breakout watch
The Australian dollar finds itself trading within two technical structures that could have very different implications against the US dollar and Japanese yen, putting both pairs on the watch list for potential breakouts in the short to medium term.
While risk appetite appears to be exerting greater influence on AUD/USD, relative yields have seemingly become more influential for AUD/JPY. However, there are important considerations for both pairs that traders should be aware of before contemplating potential setups.
AUD/USD and AUD/JPY: Different drivers at work
Before looking at the technical picture for both pairs, it's noticeable that AUD/JPY, which has long been regarded as a risk proxy, has more recently been behaving like a relative yields play, with AUD/USD seemingly more closely tied to risk appetite, particularly in cyclical assets.
Source: LSEG
You can see that in the correlation matrix above, with a positive and strengthening relationship between AUD/USD and industrial equities, reinforced by the very strong inverse correlation with VIX futures. There's also evidence of linkages with industrial metals, although we haven't seen the consistent strengthening witnessed against industrial equities.
Even though a degree of caution is required given the relatively short time frames, the evidence suggests risk appetite, more than yields, likely explains much of the Aussie's struggles recently.
However, when it comes to AUD/JPY, the matrix shows strong positive relationships with Australian–Japanese yield spreads across the two-year, five-year and 10-year tenors, whereas there is no meaningful relationship with cyclical assets.
Again, it's a very short window, so the message needs to be treated with a degree of caution. But more recently, relative yield movements may have been more influential on the pair.
AUD/USD: Another bearish continuation pattern emerging?
Source: TradingView
AUD/USD has been in a pronounced downtrend since the high set on September 9. Within that broader trend, we've seen a number of consolidation phases that have eventually broken down, with the pair's performance often aligned with the technical patterns it was trading in.
The latest is a structure resembling a triangle on the four-hourly chart, although the limited number of touches on either side, particularly along the rising support line, still provides reason for caution.
A level of note near where the price currently trades is the 23.6% Fibonacci retracement of the move from the Liberation Day low in April 2025 to the May 2026 high. While the price continues to trade around this level, it's arguably more of a reference point than one that could be used for trade construction.
Given the direction of travel into the structure, should it play out as convention would suggest, traders should be alert to the risk of a downside break, potentially putting a retest of the October 1 low of 0.6907 into play, where the structure initially formed.
Beyond there, levels of note on the downside include the 0.6860–0.6865 support zone, reflecting two nearby swing lows, followed by 0.6835, another low established earlier this year.
The message from the oscillators is broadly neutral, with RSI (14) sitting just beneath the 50 level, while MACD is running parallel to the signal line, both just in negative territory. That places greater emphasis on the price action in the near term.
However, it's clear from the path of travel over the past month that selling into rallies remains the preferred play unless we see a sustained break of the downtrend.
Should the triangle be broken on the topside, accompanied by a break of the September downtrend, it would weaken the case for short setups, putting levels such as 0.7004 and 0.7040 into play.
AUD/JPY: Potential falling wedge takes shape
Source: TradingView
AUD/JPY is beginning to coil in what resembles a falling wedge on the four-hourly chart. While not shown, the structure has formed following the powerful rally from the lows set during the Liberation Day rout in April 2025, strengthening the case for a potential topside breakout given its characteristics as a bullish continuation pattern.
Right now, the price finds itself towards the upper side of the structure, having pulled back following a false break on Wednesday.
109.90 is a reference point just beneath where the price currently trades, having acted as both resistance and support over recent days. While only a minor level, it looms as one that could be used for setup construction by traders unwilling to wait for a potential breakout of the broader structure.
Should we see a sustained push through descending resistance extending from the highs set in early September, 110.65 is the first level of note, marking the high set earlier this week. Beyond that, 111.00, 111.58 and 112.62 are the next topside levels to watch.
Below 109.90, the lower boundary of the structure is currently found around 108.90, although the price also spent some time trading either side of 109.50 earlier this week, putting that level on the radar.
The lower boundary is also close to 108.78, a swing low set on April 1 this year from which a savage rally ensued, making the 108.78–108.90 region a support zone of note in the near term.
The message from the oscillators is again neutral, placing greater emphasis on the price action, particularly with very little on the macro calendar over the remainder of the week.
As such, risk appetite and sentiment, including developments in crude prices and their influence on global bond yields, loom as the fundamental factors to watch in the days ahead.
Understanding cycle structures helps traders navigate complex forex moves with clarity. AUDJPY analysis showed Elliott Wave principles identified a corrective end and anticipated a sharp 400‑pip sell‑off.
The Forecast: Identifying the Wave 2 Peak
In our September 21, 2026 analysis, AUDJPY was completing a 3‑wave rally from the 108.90 region. The rally into 112.61 marked wave 2 (or ((c)) of 2), aligning with the 1.618 Fibonacci extension at 112.88. A red Turning Down tag appeared near 112.61, setting 112.6119 as the invalidation level. With wave 2 complete, bias shifted to a reversal lower into sub‑waves (i) and (ii), preparing for wave 3 decline.
See chart below
The Outcome: Impulsive Drop 400 Pips In Motion
Following the 112.61 peak, AUDJPY broke down sharply, completing a clean 5‑wave impulse with wave ((iii)) of 3 near 108.50. The decline spanned over 400 pips, with price consolidating around 110.11, still more than 360 pips below the highs. Structurally, AUDJPY is completing a (w)–(x)–(y) double corrective bounce in wave ((iv)) near 110.11. As long as price stays below the invalidation level, another leg down in wave ((v)) is expected to finish wave 3. This should be followed by a corrective bounce in wave 4, then a final swing lower in wave 5 of (C) of ((2)). Afterward, the pair is projected to turn higher, resuming the broader bullish sequence.
See chart below
Key Takeaways for Traders
For traders, rejection below the 1.618 Fibonacci extension at 112.88 confirmed the corrective structure had ended. Clear invalidation levels, like 112.61, provided disciplined risk management by defining exposure against the higher‑degree trend. Patience during corrective phases—such as the ongoing wave ((iv)) bounce—remains essential, offering clarity before the main trend resumes.
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AUDJPY currency pair recently reversed up from the key support level 109.00, which previously stopped wave (4) in May and wave (C) at the start of August and which coincides with the lower daily Bollinger Band.
The upward reversal from this support level completed the intermediate corrective wave (2) which started from the top of wave (1) at the resistance level 115.00 in September.
Given the strength of the support level 109.00 and the bullsih divergnce on the daily Stochastic oscillator, AUDJPY currency pair can be expected to rise further toward the next resistance level 111.00, which has been reversing the price from July.
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AUD/JPY's drop for six straight seasons and near six-month lows fall mostly comes from a weak Australian dollar, driven by soft CPI numbers and cautious RBA signals, rather than a strong yen. The yen itself has gotten some selective boosts from Bank of Japan rate-hike talks and intervention warnings. These developments only made the pair's slide worse. With conditions oversold, there might be opportunities for tactical long positions. The AUD/JPY currency pair fell for six trading days straight, hitting a six-month low around 109.40-109.50 today. Earlier this month, the pair dropped sharply from above 114. This move stems from several factors market participants are watching closely.
Figuring out where this pair goes next means analysts must determine if the current downtrend is mostly due to a weaker Australian dollar, a stronger Japanese yen, or a mix of both.
Making Sense of the Aussie’s Slump A few things have weighed on the AUD/JPY lately. The Australian dollar faces lower expectations, while the yen sees steady safe-haven demand.
The Australian dollar was sold off sharply after domestic inflation numbers were weaker than expected. This made markets less hopeful the Reserve Bank of Australia (RBA) would raise interest rates anytime soon.
Also, slower economic growth data from key regional trading partners has squeezed commodity-linked currencies. That’s sent the AUD/USD toward important multi-month support.
Looking at inflation, Australia’s monthly Consumer Price Index (CPI) climbed only 0.4% in August, a dip from July’s 1% jump. While the annual rate did climb to 4%, the monthly figure dampened hopes for more monetary tightening. Labor market data also added to this picture, with unemployment hitting 4.6% in August.
Meanwhile, the yen’s been consistently strong. Its strength stems from Bank of Japan (BoJ) policy signals and warnings against the currency falling too much. The BoJ hiked its policy rate to 1.25% in early September.
Japanese officials’ recent statements, alongside coordinated messages from the United States, point to more policy tightening or currency support measures coming soon.
Outlook For the Coming Weeks What happens next depends on upcoming economic data. Market sentiment will react to Australia’s latest inflation and job figures, China’s economic activity (which affects commodity currencies), and any new remarks from the BoJ or Japanese officials.
Global risk appetite is also important. The AUD/JPY pair often moves with shifts in investor confidence for riskier assets and carry trade dynamics.
Traders watching specific events will pay close attention to the CPI release on October 28th. If inflation is higher than expected, it could rekindle talk of RBA rate hikes and squeeze short positions. But lower inflation would only confirm the current downward trend.
Market opinions on the RBA’s next step are split. Admiral’s figures show traders see about a one-in-three chance of another rate increase. Meanwhile, Paul Bloxham at HSBC expects a hike in the fourth quarter, probably in November.
For the AUD/JPY pair to really recover, we’d probably need clearer signs of a more hawkish RBA or less support for the yen. Until that happens, any gains will likely be temporary corrections within the broader downtrend that started after its late August peak.
Is the AUD/JPY decline mainly from Australian dollar weakness?
Yes, it mostly is. Soft Australian CPI data and cautious guidance from the RBA have pressured the Aussie. Only a small part of this change comes from actual yen strength.
What role has the Japanese yen played in the slide?
The yen has found support from expectations of a BoJ rate hike and official warnings about intervention. This has made the pair’s decline even bigger than what we’d see from just AUD weakness.
What is the main risk for sellers?
Sellers face a few risks. If Australian CPI data comes in hot, it could revive bets on an RBA hike. Also, a dovish shift from the BoJ could cause sharp rebounds; sellers should manage that risk carefully.
TL;DR: EUR/JPY and AUD/JPY have broken key technical support this week, but the weekly performance breakdown shows only 0.1–0.3 percentage points of that weakness comes from genuine Yen strength—the rest reflects Dollar and Yen as the two strongest majors, with intervention risk capping USD/JPY and forcing Euro, Aussie, Sterling and Kiwi weakness to pass directly into their Yen crosses.
Why This Matters When several Yen crosses break support in the same week, the reflexive read is a broad Yen rally. But cross rates are arithmetic, not sentiment, and the underlying math this week tells a more specific story: Yen is not surging broadly, it is being held up by an intervention ceiling on one specific pair. That distinction matters directly for how far EUR/JPY and AUD/JPY can fall, and it hands traders a clean diagnostic—USD/JPY itself—for telling a contained cross-driven move apart from the start of a genuine Yen rally.
It Looks Like a Yen Rally, but the Arithmetic Says Otherwise EUR/JPY and AUD/JPY have both broken important technical support this week. GBP/JPY and NZD/JPY have weakened alongside them. At first glance, the price action looks like a broad Yen rally. But the weekly performance breakdown tells a more specific story.
EUR/USD is down around -0.91%, compared with a -1.04% decline in EUR/JPY. AUD/USD has fallen roughly -1.82%, while AUD/JPY is down -1.97%. The same pattern extends to Sterling and Kiwi: GBP/USD is down around -0.69% versus -0.98% in GBP/JPY, while NZD/USD has fallen -1.12% against -1.41% in NZD/JPY.
That means only around 0.1 to 0.3 percentage point of the weakness in those Yen crosses reflects additional Yen appreciation beyond what is already happening against the Dollar. USD/JPY itself is almost unchanged on the week. The real picture is therefore that Dollar and Yen are the two strongest major currencies, while Euro, Aussie, Sterling and Kiwi are losing ground against both.
That raises the more interesting question: why is that relative strength producing outright breakdowns in EUR/JPY and AUD/JPY while USD/JPY itself is barely moving?
Dollar Strength Survives a Collapse in October Hike Odds The Dollar side of the equation is particularly notable because one of its recent supports has weakened sharply. CME FedWatch pricing now puts the probability of an October Fed hike at around 47%, down from roughly 71% a day earlier. The shift followed New York Fed President John Williams’ remarks in Buffalo on Tuesday. Williams said there was “no need for urgency” after September’s rate increase and that, if the economy develops broadly in line with his forecast, one further hike may be appropriate “late this year.”
That has turned October from something markets were leaning toward heavily into something much closer to a coin flip. But it has not produced a corresponding collapse in the Dollar.
Part of the reason is that Williams’ message was about timing, not an outright rejection of further tightening. Federal Reserve Governor Michael Barr continued to argue that further policy adjustments are likely to be required, while Chicago Fed President Austan Goolsbee warned that keeping inflation above target for so long was “playing with fire.”
More importantly, U.S. Treasury yields remain historically elevated even after easing from their latest highs. The 10-year yield reached its highest level since 2007 this week, while the broader bond selloff has kept U.S. yields high enough to preserve substantial structural support for the Dollar. So the Dollar story has changed, but not reversed: the market has lost conviction that the next Fed hike must come in October, but it has not lost the high-yield environment that made the Dollar attractive in the first place.
Yen Strength Comes From an Intervention Ceiling The Yen is being supported by a very different mechanism. The BOJ raised its policy rate to 1.25% on September 18, the highest in 31 years. But the Yen did not respond with a sustained rally because Governor Kazuo Ueda stopped short of delivering a clearly accelerated tightening path, while two board members dissented from the hike.
What changed subsequently was the intensity of the currency-policy warning. U.S. President Donald Trump raised concern over Yen weakness directly with Japanese Prime Minister Sanae Takaichi during their September meeting. Finance Minister Satsuki Katayama subsequently said both governments shared concerns about the Yen’s undervaluation, while Katayama and U.S. Treasury Secretary Scott Bessent agreed to maintain close communication on foreign exchange. Those exchanges came after coordinated U.S.-Japan Yen-buying intervention earlier in the year. Japan’s top currency diplomat Atsushi Mimura then reinforced the message on Monday, telling markets to take the “very clear” warning from Tokyo and Washington “at face value.”
That history makes the current jawboning harder to dismiss as routine rhetoric. But the effect so far is more specific than a generalized surge in Yen demand—it is acting as a ceiling over USD/JPY. And that distinction explains what is happening in the crosses.
Why Intervention Risk Hits the Crosses Harder Cross rates are arithmetic. EUR/JPY can be expressed through EUR/USD and USD/JPY, and the same relationship applies to AUD/JPY, GBP/JPY and NZD/JPY.
In a conventional broad-Dollar rally, the two legs partially offset each other. Suppose EUR/USD falls because the Dollar strengthens: under normal circumstances, that same broad Dollar strength would also lift USD/JPY, cushioning the decline in EUR/JPY. This week, that cushion is largely absent. Intervention risk is preventing USD/JPY from participating fully in the Dollar’s wider advance—the Dollar can strengthen sharply against Euro, Aussie, Sterling and Kiwi without making comparable progress against Yen. The weakness in those currencies therefore passes much more directly into their Yen crosses.
That is why EUR/JPY can break lower even though USD/JPY is barely moving, and why AUD/JPY can suffer an even sharper decline when Aussie is already under independent pressure following the RBA and Governor Michele Bullock’s cautious guidance. The key mechanism is therefore not that intervention risk is generating enormous standalone Yen demand—it is that intervention risk is removing the offset that would normally cushion Yen crosses during a broad Dollar rally.
ActionForex’s Technical View on EUR/JPY, AUD/JPY and USD/JPY EUR/JPY Heads Toward the 175.26–175.41 Test
The technical picture in EUR/JPY fits that mechanism closely.
The break of 177.82 support argues that the decline from 187.93 has resumed. Near-term risk therefore remains on the downside while 181.53 resistance holds.
But the larger fall can still be treated as a correction of the medium-term rally from 154.77 to 187.93, rather than a confirmed trend reversal.
The key test is the 175.26–175.41 support zone.
The 175.26 level represents the 38.2% retracement of the 154.77–187.93 advance, while 175.41 corresponds closely with the 2025 high. That makes the area an important technical confluence where a stronger rebound could emerge.
A sustained recovery above 181.53 would be the first meaningful indication that a short-term bottom has formed.
A decisive break through 175.26–175.41, however, would materially weaken the medium-term structure and increase the risk that the decline has become more than a correction. In that case, the 167.44 area, the 61.8% retracement of the same advance, would become the next major downside reference.
AUD/JPY Has the Cleaner Bearish Structure
AUD/JPY is technically more vulnerable.
The decline from 114.95 resumed with the break of 109.66, while the subsequent loss of 109.25 confirms that the correction is now retracing the much larger advance from 86.03.
The bearish case is also reinforced by the pair’s earlier rejection from the daily 55 EMA.
The next downside objective is around 107.32, representing the 100% projection of the 114.95–109.66 decline measured from 112.61.
A firm break there would expose 103.90, the 38.2% retracement of the entire 86.03–114.95 rally.
Any rebound should remain corrective while 112.61 resistance holds.
That gives AUD/JPY a cleaner downside structure than EUR/JPY, while the fundamental backdrop also reinforces it: Aussie is absorbing both broad Dollar strength and its own post-RBA repricing at the same time that intervention risk is preventing USD/JPY from providing an offset.
USD/JPY Is the Control Chart
USD/JPY is the most important chart for deciding whether this interpretation remains valid.
The pair has retreated from 159.02, but the decline has so far looked more like a corrective pullback than a renewed collapse from the larger 163.97 high.
Price is now testing the 156.67 area, corresponding to the 38.2% retracement of the rebound from 152.87 to 159.02.
If that support holds and USD/JPY turns higher, the intervention-cap interpretation remains intact. Officials may be limiting the Dollar’s upside against Yen, but they have not yet produced a decisive bearish reversal.
A recovery through 159.02 would strengthen that view and reopen 160.38.
By contrast, sustained weakness through the current support area would begin to signal something broader than an intervention-constrained Dollar rally. A break back through 152.87 would materially weaken the rebound structure and expose 151.92, around the 50% retracement of the larger rise from 139.87 to 163.97.
That creates a useful diagnostic:
If USD/JPY holds while EUR/JPY and AUD/JPY continue falling, the relative-strength mechanism remains intact. If USD/JPY itself starts breaking major support, then the story is becoming a genuine broader Yen rally. When Does This Become a Real Yen Rally? The technical picture currently mirrors the fundamental thesis unusually well. EUR/JPY and AUD/JPY have both broken important support and are carrying weak momentum. USD/JPY, by contrast, remains caught between a strong Dollar backdrop and increasingly credible Japanese intervention warnings, leaving the Yen crosses to absorb most of the adjustment. For EUR/JPY, 175.26–175.41 is the next major structural test; for AUD/JPY, the immediate focus is 107.32, with 103.90 becoming vulnerable if the correction extends.
But USD/JPY remains the control chart. As long as it holds around the current support structure, the breakdown in Yen crosses can still be understood primarily as weak Euro, Aussie and other currencies being transmitted through a USD/JPY pair capped by intervention risk. A sustained USD/JPY break lower would change that conclusion. Until then, the crosses may look like they are leading a broad Yen rally. The arithmetic says they are mostly revealing what happens when Dollar strength has nowhere to go against Yen.
Key Takeaways Only 0.1–0.3 percentage points of this week’s EUR/JPY, AUD/JPY, GBP/JPY and NZD/JPY weakness reflects genuine Yen strength beyond what’s already priced against the Dollar. October Fed hike odds fell to 47% from 71% after Williams’ remarks, but elevated Treasury yields have kept the Dollar’s structural support intact. Japan’s intensifying intervention warnings, from Trump-Takaichi talks through diplomat Atsushi Mimura, are capping USD/JPY specifically rather than lifting Yen broadly. That cap removes the usual offset in Yen crosses, so Euro, Aussie, Sterling and Kiwi weakness passes more directly into EUR/JPY and AUD/JPY. USD/JPY is the key diagnostic: holding support near 156.67 keeps this a cross-driven story, while a break below 152.87 would signal a genuine broad Yen rally.
ActionForex
ActionForex.com was set up back in 2004 with the aim to provide insightful analysis to forex traders, serving the trading community for two decades. We started providing only a daily and a mid-day report, now known as Action Insights. Gradually, we added a lot more in-house contents to the site. Technical Outlook section was expanded to cover more pairs. In addition to that, Top Movers, Heat Map, Pivot Point Charts and Pivot Meters, Action Bias and Volatility Charts, are tools used by traders from all over the world.
AUD/JPY has run into firm resistance near 121.00, with its bullish momentum stalling. This follows significant volatility, driven by shifts in global risk sentiment and the appeal of carry trades The pair is now consolidating in a range. Its next move will likely hinge on central bank hawkishness and other big global economic signals. Carry traders might see their positions at greater risk of unwinding during this consolidation. Still, the interest rate difference slightly favors the Australian dollar for now. The AUD/JPY forex pair has seen its upward trend stall this week after a period of gains. The currency pair is facing resistance around the 112 level and has been consolidating between approximately 111.30 and 111.50 today.
This period of consolidation prompts consideration of whether a more significant pullback or a strengthening of the yen is imminent, potentially mirroring the corrective movement seen from late August to mid-September.
Technical Barrier Signals Exhaustion Technical indicators suggest upward momentum might be running out of steam. While not breaking 112 doesn’t immediately signal a market downturn, it does resemble the peak seen in late August.
The pair currently trades below its 100-day moving average, and the 14-day Relative Strength Index (RSI) sits near 49, suggesting neutral momentum.
If it breaks below the short-term support at 111.00, we could see a further drop toward the 110.00 support level, where its 200-day exponential moving average sits.
Will the Yen Repeat Its Earlier Rebound? Market conditions are different now. That earlier decline, which started after September 4, happened as risk appetite fell due to the US-Iran conflict and growing speculation about the Bank of Japan (BoJ) tightening its monetary policy.
Since then, the BoJ has raised interest rates by 25 basis points to 1.25%, the highest since 1995. Still, this wasn’t a unanimous decision, with two board members dissenting in a 7-2 vote.
Market participants see about a 30% chance of another rate hike to 1.50% in October. This suggests the yen might get less policy support than it did during its last rebound.
The AUD/JPY pair has been trading in a multi-week range lately. It doesn’t look like it has much room to move higher without a big push, perhaps from a major shift in market risk sentiment or surprising news from central banks.
What This Means for Carry Traders Carry traders have often found the AUD/JPY appealing due to the interest rate gap between Australia and Japan. The Reserve Bank of Australia’s higher policy rates, particularly compared to the BoJ’s slower path to normalization, typically helped those who bought Australian dollars by borrowing yen.
Today’s price action near resistance levels reminds us of the risks in carry strategies. If momentum drops or markets get more volatile, positions can unwind. That’s especially true if global risk sentiment sours or if the BoJ hints at tightening money faster.
Carry traders might want to strengthen their risk management, cut back on leverage, or take some profits while the market consolidates.
This week’s pause in upward momentum doesn’t necessarily mean a big trend reversal is coming. But it does highlight why traders, especially those involved in trend following and carry trades, should be careful.
Has AUD/JPY reversed its recent upward trend?
After gaining last week, AUD/JPY stalled near 112 resistance this week. Its momentum has slowed, but to call it a reversal, we’d need to see a clear break of key support levels.
Could the Japanese yen rebound as it did earlier?
Yes, a yen rebound, much like what we observed between late August and mid-September is possible if support levels don’t hold
What does the stall signal for carry traders?
This stall highlights a growing risk of positions unwinding, meaning carry traders should consider tighter risk controls. Less momentum can really pressure leveraged long AUD positions against the yen.
The AUD/JPY pair advanced over 1% after the BOJ’s expected rate hike to 1.25%, as dissenters softened the signal while Australia’s 4.35% cash rate preserved a wide, supportive yield differential Near-term outlook for AUD/JPY remains constructive, supported by the persistent interest-rate gap and rising expectations of further RBA tightening Solid demand for high-yielding currencies and broader global market stability continue to support the Australian dollar, encouraging investors to utilize dip-buying carry trade strategies. The Bank of Japan lifted its policy rate by 25 basis points to 1.25%, reaching its highest point since 1995. Board members voted 7-2 on the decision, with two dissenting votes coming from appointees of Prime Minister Sanae Takaichi.
While central bank policy tightening typically strengthens a country’s currency, the Australian dollar actually gained on the yen. AUD/JPY rose over 1% during the Asian trading session, now trading near 112. That might seem strange initially, but it makes sense considering how the market is acting.
Why AUD/JPY Moved Higher The AUD/JPY pair moved higher mainly because the market had already factored in the Bank of Japan’s rate hike. After the announcement, the yen actually weakened. Investors appeared more concerned with the absence of aggressive forward guidance than with the rate increase itself.
Many traders had opened short positions in AUD/JPY ahead of the meeting. The announcement then triggered an immediate unwinding of these trades, as they closed out their yen shorts without clearer signals from Governor Kazuo Ueda.
What’s more, a substantial interest rate gap still favors the Australian dollar. Even with the BoJ’s rate hike to 1.25%, its highest level since 1995, the Reserve Bank of Australia’s (RBA) cash rate remains much higher at 4.35%.
This significant difference supports the AUD/JPY carry trade, a strategy where investors borrow in low-yielding yen to invest in higher-yielding Australian assets.
Outlook for AUD/JPY Favours the Bulls AUD/JPY appears poised for an upward trend in the short term. As long as that interest rate gap remains wide and the RBA stays hawkish, funds will likely continue moving toward the Australian dollar.
The recent price increase and improved technical momentum suggest the pair might test nearby resistance levels, assuming global risk appetite holds steady.
The BOJ’s cautious approach to normalizing policy, alongside Japan’s still-low interest rates compared to other countries, makes it tough for the yen to sustain a recovery against higher-yielding currencies like the Australian dollar.
For AUD/JPY to really strengthen, we’d need ongoing signs of stubborn Australian inflation to keep the RBA’s policy tight. Stable global growth, which would boost commodity demand, would also help. If those conditions align, the pair might gradually appreciate over the next few sessions.
Traders will likely keep buying AUD/JPY dips to profit from yield differences, unless the BoJ signals a series of quick rate hikes. So, the pair looks set to stay bullish and trade within its recent high ranges.
Potential Disruptors to the Momentum Still, a few things could change this path. If BoJ Governor Kazuo Ueda sounds more assertive in upcoming statements, or if there are clearer signs of faster rate hikes ahead, that would probably boost the yen and push AUD/JPY down.
Also, a big drop in global risk appetite usually sends investors to the yen as a safe haven, which would hurt the Australian dollar. A slump in key Australian commodity prices, like iron ore, or clear signs of a domestic economic slowdown that makes the RBA pause its tightening could also cut into that yield advantage.
Any unexpected narrowing of the interest rate differential, say if Japan tightens monetary policy more aggressively or Australia shifts its policy sooner, would undermine the carry trade that supports the pair.
Why did AUD/JPY rise after both central banks hiked rates?
The Bank of Japan’s rate hike was widely anticipated and didn’t seem hawkish enough, especially given the split vote. Australia, in contrast, has kept its cash rate much higher, creating a wide yield gap that continues to favor the Australian dollar.
How large is the interest-rate gap between Australia and Japan now?
Australia’s cash rate is still 4.35%, while Japan’s new policy rate sits at 1.25%. This creates an interest rate difference of more than three percentage points, which encourages carry trades.
What role did risk sentiment play in driving the Australian dollar higher on Friday?
Overall global market optimism, combined with the Fed’s interest rate decisions, increased demand for riskier currencies like the Australian dollar. This came at the expense of traditional safe havens such as the yen.
The AUD/JPY cross loses momentum to near 110.75 during the early European session on Thursday. The Japanese Yen (JPY) strengthens against the Australian Dollar (AUD) amid rising expectations of a near-term interest rate hike by the Bank of Japan (BoJ).
According to a Reuters poll, the BoJ is likely to hike interest rates to 1.25% at its September policy meeting and then to 1.75% in the second quarter (Q2) of 2027, earlier than previously thought.
BoJ board member Kazuyuki Masu said on Thursday that the central bank may eventually be forced to raise interest rates rapidly if inflation accelerates, given the country's loose financial conditions.
Last week, BoJ board member Hajime Takata stated that the central bank could take a more aggressive approach than expected. Takata further stated that a 25-basis-point hike “is not necessarily set in stone,” and that generally speaking, back-to-back rate hikes would be a possibility, too.
BoJ urged to avoid fresh surprises after July carry shockDBS Group Research stresses that the BoJ must tread carefully at its upcoming meeting, warning that policymakers should remain “mindful of the market impact of large policy surprises,” especially after the “unexpected rate hike in July 2024 triggered a massive JPY carry-trade unwinding and jitters across global financial markets.” The bank cautions that “the risk of carry-trade unwinding and excessive market volatility should not be underestimated if the BoJ were to surprise markets this time,” underscoring the importance of a well-telegraphed and measured policy move.
Technical Analysis: AUD/JPY remains capped under the 100-day SMAIn the daily chart, AUD/JPY extends a corrective phase below the clustered resistance of the 100-day Moving Average (MA) and the Bollinger Bands’ 20-period simple moving average (SMA). This positioning keeps the near-term bias bearish, with price holding closer to the lower Bollinger band, while the Relative Strength Index (14) hovering around 33 suggests weak, oversold-leaning momentum that so far fails to trigger a meaningful rebound.
On the topside, initial resistance is seen at the August 10 low of 111.63, en route to the August 20 low of 112.52. The critical hurdle is located at 113.10, representing the 100-day MA and the Bollinger midline. The upper Bollinger band near 115.60 acting as a more distant cap.
On the downside, the lower Bollinger band at 110.60 offers the first notable support. A sustained break beneath this level would expose the 110.00 psychological level, followed by August 3 low of 109.24.
(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.
The AUD/JPY currency pair dipped to a four-week low, even as iron ore prices climbed. This drop largely came from a stronger Japanese yen and a pullback in global carry trades Signals from the BoJ hint at a possible interest rate hike in September, boosting the yen and making currency intervention less likely. Meanwhile, the RBA holds at 4.35%, pointing at stubborn inflation The AUD/JPY's downward slide could extend into September. This depends on the BoJ confirming monetary tightening and China's economic data staying weak The Australian dollar dropped against the Japanese yen this week, which might seem a bit odd. After all, Australia’s main export, iron ore, recently topped US$100 per tonne, reaching its highest intraday price since early July.
Normally, strong commodity prices like that would boost the Aussie dollar. Yet, the AUD/JPY exchange rate has instead fallen to four-week lows, slipping below 111.00. So, what’s going on?
Why Has AUD/JPY Turned Bearish? The AUD/JPY isn’t weakening because Australia’s economy is struggling. Instead, it’s the Japanese yen that’s gaining significant strength. Talk of the Bank of Japan (BoJ) raising interest rates has surged after central bank officials made clear statements, even hinting at possible consecutive rate hikes.
With Japan’s GDP and wage growth picking up, market watchers now expect a 25-basis-point rate increase to 1.25% at the next BoJ policy meeting. Plus, the Ministry of Finance’s interventions in July and August, which caused a record drop in foreign reserves, also helped the yen rebound from multi-year lows.
As the interest rate gap narrows and Japanese yields climb, carry trades, which once favored the higher-yielding Australian dollar, are unwinding much faster.
What this Means For BoJ and RBA Decisions For the BoJ, a consistently strong yen means less immediate pressure to intervene further in the currency market. This also aligns with their plan for a gradual return to normal policy.
A stronger yen helps manage import costs, letting the central bank focus on domestic inflation trends. Markets have already priced in a September rate hike. Any further increases later this year will probably hinge on new data regarding wages, services inflation, and economic growth.
The Reserve Bank of Australia (RBA) faces a different set of considerations. Strong commodity prices certainly help the nation’s terms of trade, but a weaker currency against key Asian trading partners could push up imported inflation.
Still, with domestic economic indicators looking stable, the RBA isn’t expected to change its policy cash rate. Their focus remains on controlling inflation, rather than directly managing the currency.
All eyes will be on the RBA’s policy meeting in late September, awaiting any shifts in its economic outlook. Another rate hike remains possible if domestic data stays strong, though markets currently see only a moderate chance of this happening.
Will the Downturn Extend? The AUD/JPY pair will likely continue facing downward pressure in the short term. Should the BoJ confirm an interest rate hike, combined with any signs of weaker activity in China or less demand for iron ore, the pair could drop towards lower support levels around 110.
A stronger yen would also make carry trades less appealing. Conversely, stronger-than-expected Australian economic data or new stimulus from China might help stabilize the Australian dollar.
This downward trend for AUD/JPY appears set to continue through September, primarily driven by central bank policy decisions.
The long-term trajectory will depend on improvements in iron ore markets and the pace at which the BoJ normalizes policy relative to the RBA. Both central banks’ September meetings should offer significant insight into these future directions.
Why is AUD/JPY falling even though iron ore prices are rising?
The yen’s strength is pulling the pair lower. This isn’t about Australian fundamentals. Instead, it’s driven by hawkish Bank of Japan signals, including expectations for a rate hike and the impact of past interventions.
Why has AUD/JPY fallen despite higher iron ore prices?
The Australian dollar saw some temporary support from higher iron ore prices. But market expectations for a Bank of Japan rate hike, coupled with a stronger yen had more sway.
How might this affect Bank of Japan decisions?
A stronger yen reduces the need for direct currency intervention. It also helps the BoJ pursue steady rate increases, focusing on domestic inflation rather than just defending the currency.
The AUD/JPY cross trades in negative territory around 110.75 during the early European trading hours on Tuesday. A slew of hawkish comments from the Bank of Japan (BoJ) policymakers have cemented views that the BoJ will raise interest rates this month, supporting the Japanese Yen (JPY) against the Australian Dollar (AUD).
BoJ board member Hajime Takata said last week that the central bank could take a more aggressive approach than expected. He said a 25-basis-point hike “is not necessarily set in stone,” and that generally speaking, back-to-back rate hikes would be a possibility, too.
The Japanese central bank is expected to raise its benchmark interest rate by 25 basis points (bps) to 1.25% at its upcoming policy meeting on September 17–18.
BoJ hawkish signals keep Yen bulls on the front footAnalysts at MUFG highlight that the recent shift in tone from the BoJ was underscored by policy board member Hajime Takata, who told local business leaders on 2 September that the Bank needed to "conduct rate hikes nimbly" and should not be "bound by particular intervals or ranges anticipated in the markets." MUFG notes that, even though Takata subsequently pushed back against the prospect of a larger move at the upcoming meeting, his remarks have nevertheless encouraged investors to contemplate not only a faster pace of tightening but also the possibility of "larger individual moves" from the BoJ.
Technical Analysis: AUD/JPY remains bearish below the key 100-day SMAIn the daily chart, AUD/JPY remains under a dense band of resistance, with price lodged below the 100-day simple moving average (SMA) and even the Bollinger Bands’ (20, 2) lower band, reinforcing a capped, bearish near-term tone. The Relative Strength Index (14) at 32.65 hovers just above oversold territory, suggesting downside momentum is still dominant but increasingly stretched.
On the topside, the immediate resistance level emerges at the August 10 low of 111.63. The key hurdle to watch is in the 113.15-113.25 zone, representing the the 100-day SMA and the Bollinger midline. Beyond that, the upper Bollinger band at roughly 115.35 marks a more distant barrier.
On the flip slide, the 110.00 psychological level acts as an initial support level for the cross. Further south, the next downside target to watch is the August 3 low of 109.24.
(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.
TL;DR: Strong Japanese GDP and wage data have pushed a September BoJ hike to near-certainty, and while AUD/JPY and NZD/JPY are both falling on Yen strength, the underlying stories differ — Australia’s hawkish RBA narrative is meeting domestic resistance, while New Zealand’s tightening path has failed to convince markets it will extend.
Strong Japan Data Gives the Yen Rally Fresh Fuel The Yen’s advance accelerated on Tuesday as another round of stronger Japanese data reinforced expectations for a September BoJ hike and shifted attention toward how quickly tightening could continue afterward. Revised Q2 GDP showed the economy expanding 0.4% q/q, up from the preliminary 0.3%, while annualized growth was upgraded from 1.1% to 1.4%. Capital expenditure was also revised to a smaller 0.9% decline from the initially reported 1.2% fall. Private consumption was flat, but the overall picture was one of an economy holding up well enough to reduce the case for delaying normalization.
The wage data were more decisive. Nominal cash earnings accelerated from a revised 4.0% to 4.7% y/y in July, the strongest increase since 1997 and well above expectations around 3.8–3.9%. Real wages rose 2.4%, base pay increased 4.1%, and a cleaner full-time measure excluding bonuses, overtime, and sampling distortions still gained 2.7%. The breadth of the improvement makes the report harder to dismiss as a summer-bonus distortion and strengthens the wage side of the BoJ’s normalization case.
Markets have responded accordingly. A September hike to 1.25% is now priced at around 98%, while another increase to 1.50% by January is effectively fully discounted. Longer-dated pricing points to roughly 3.7 cumulative hikes by July 2027, making the debate less about whether the BoJ moves next week and more about the pace of what comes afterward.
September Is Nearly Settled. The Next Hike Is the Bigger Question. That shift is also appearing in policy commentary. Takuji Aida, an economic adviser to Prime Minister Sanae Takaichi and member of a key government economic panel, said on Monday that the BoJ is likely to raise rates in September and continue at roughly a quarterly pace through January 2027 before slowing the cadence.
The significance isn’t simply that Aida expects another hike. He had previously seen the next move coming in January 2027 and has now brought that forecast forward to September. Coming from an adviser associated with an administration traditionally more tolerant of accommodative policy and a weaker Yen, the shift reinforces the impression that the hurdle for near-term tightening has fallen.
The next test is whether markets are right to extrapolate that into a sustained cycle. Japan’s wage data provide stronger support for normalization, but private consumption remains flat and household spending has been weak. Those demand indicators will matter increasingly once September is delivered. For now, however, the relative-rate story is moving decisively in the Yen’s favor.
AUD/JPY: Australia’s Hawkish Story Runs Into Domestic Weakness AUD/JPY is being hit from both directions. Japan has just delivered stronger growth and wage data that reinforce the BoJ’s tightening case. Australia, meanwhile, produced a pair of releases showing how uncomfortable its own economy is becoming with the possibility of higher rates.
NAB Business Conditions fell from 4 to -1 in August, turning negative for the first time in six years. Profitability collapsed from 1 to -9, its weakest post-COVID reading, as purchase-cost growth of 2.3% q/q continued to outrun product-price growth of just 0.8%. Trading conditions weakened as well, although employment held comparatively firm.
Consumer data told a similar story. Westpac–Melbourne Institute Consumer Sentiment dropped 5.2% from 88.9 to 84.4 in September, with households becoming markedly more concerned about future borrowing costs. The Mortgage Rate Expectations Index rose from 158.8 to 170.4, while 64% of consumers — and around 73% of mortgage holders — now expect mortgage rates to rise over the coming year.
That doesn’t mean the RBA tightening story has disappeared. July inflation was strong enough to keep another hike live, and Westpac itself says the probability of a future move has increased. But Westpac still expects the RBA to hold at the September 28–29 meeting, arguing one monthly inflation print is insufficient to justify an immediate response.
The important point for AUD/JPY is therefore not that Australia has suddenly become dovish. It’s that the RBA’s hawkish narrative is meeting growing domestic resistance just as the BoJ’s hawkish narrative is gaining credibility.
ActionForex’s Technical View on AUD/JPY: Approaching a Major Breakdown Point The technical structure reflects that shift. AUD/JPY’s decline from 114.95 has accelerated, and the pair is now approaching 109.25, an important structural support level. The daily MACD had already developed bearish divergence, raising the possibility that 114.95 marked a medium-term top.
A firm break of 109.25 would strengthen the case that AUD/JPY is correcting the larger advance from 86.03, opening the way toward the 38.2% retracement at 103.90.
Near-term downside could nevertheless become stretched. The four-hour RSI is deeply oversold and the daily RSI is close to 30, leaving room for an initial rebound from 109.25 even if the larger structure has turned lower. Such a recovery wouldn’t materially change the near-term bearish bias while 112.78 resistance holds, with the 55-day EMA just above around 112.98.
NZD/JPY: A Different Problem, and a More Advanced Breakdown NZD/JPY is weaker for a different reason. The RBNZ raised rates for a second consecutive meeting last week, but markets have remained reluctant to extrapolate that action into a much faster tightening path. That leaves the Kiwi with a familiar problem: policy is already tightening, yet investors aren’t becoming progressively more hawkish about what follows.
There’s no equivalent same-day domestic shock behind NZD’s weakness. Instead, this has been a slower repricing over several sessions. Against a Yen whose expected tightening path is moving in the opposite direction, that divergence is becoming costly.
The difference is visible technically as well. NZD/JPY has already broken 91.02, the kind of structural support AUD/JPY is only now approaching at 109.25.
ActionForex’s Technical View on NZD/JPY: Targeting 89.44 After Breaking 91.02 The decline from 95.42 is now seen as correcting the broader rise from 79.79, with daily MACD bearish divergence adding to the medium-term topping risk.
The immediate focus is on the 38.2% retracement of 79.79–95.42, at 89.44. A decisive break there would deepen the correction and target the 61.8% retracement around 85.76, just above the larger structural support at 85.33.
As with AUD/JPY, short-term oversold conditions could generate rebounds. The daily RSI is already deeply depressed and four-hour momentum is stretched. But while 92.28 resistance holds, recoveries would still look corrective within a broader bearish structure.
Japan Is Starting to Win the Relative-Rates Argument The common force behind both crosses is Yen strength, but the Australian and New Zealand sides shouldn’t be treated as interchangeable. AUD/JPY is falling because the BoJ tightening case is strengthening at the same time Australia’s hawkish RBA story is encountering evidence of softer household demand and squeezed business margins. NZD/JPY is further advanced because markets have been reluctant to extend the RBNZ tightening path even after consecutive rate increases.
That distinction matters because the larger shift isn’t simply toward risk aversion. For years, high-beta Yen crosses benefited from the assumption that almost every other major central bank offered a more credible tightening path than the BoJ. That assumption is now being challenged from both directions.
Japanese wages are accelerating, growth has been revised higher, and markets are pricing a sustained BoJ cycle. At the same time, the RBA’s tightening case is colliding with increasingly fragile domestic conditions, while the RBNZ has yet to convince markets that consecutive hikes will turn into a substantially longer campaign.
The BoJ decision on September 17–18 is therefore only the first confirmation point. The bigger question is whether Japan’s data continue to validate the aggressive tightening path now embedded beyond September. For AUD/JPY and NZD/JPY, that distinction is already showing up in price: one is approaching a major breakdown; the other has already made it.
Key Takeaways Japan’s Q2 GDP was revised up to 1.4% annualized and wages jumped to 4.7% y/y, the strongest since 1997, pushing a September BoJ hike to a near-certain 98% probability. AUD/JPY is falling because Australia’s hawkish RBA case is colliding with weakening business conditions and consumer sentiment, even as the BoJ case strengthens. NZD/JPY is more advanced in its breakdown because markets haven’t extended the RBNZ’s two consecutive hikes into a longer expected tightening cycle. AUD/JPY is approaching 109.25 structural support, with a break opening 103.90; NZD/JPY has already broken 91.02 and is targeting 89.44 and then 85.76. The broader shift challenges a long-standing assumption that other central banks are more credible tightening stories than the BoJ, now being tested from both the Australian and New Zealand sides. Related Reading Japan Wages Rise 4.7%, Strong Enough for BoJ Rate Hikes Australian NAB Business Conditions Turn Negative as Cost Squeeze Hits Profits Australian Consumers Sentiment Slumps to 84.4 as Rate Fears Rise, Westpac Sees September RBA Pause
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ActionForex.com was set up back in 2004 with the aim to provide insightful analysis to forex traders, serving the trading community for two decades. We started providing only a daily and a mid-day report, now known as Action Insights. Gradually, we added a lot more in-house contents to the site. Technical Outlook section was expanded to cover more pairs. In addition to that, Top Movers, Heat Map, Pivot Point Charts and Pivot Meters, Action Bias and Volatility Charts, are tools used by traders from all over the world.
A hot Nonfarm Payrolls report saw traders reprice the potential for a September Fed hike, making this week’s CPI and PPI figures all the more important. Fed funds futures are now back above a 60% probability of a 25bp hike in two weeks, after 162k jobs were added compared with the 53k expected.
We also have a 30-year Treasury auction which may garner more attention than usual, given the bouts of market volatility whenever its yield pushes above 5.3%. The last time it did, Treasury Secretary Scott Bessent doubled the size of long-end Treasury buybacks to provide greater liquidity support. The auction will therefore test whether investors are comfortable absorbing long-duration debt around current yields, or whether they demand an even higher premium.
Despite the renewed Fed risk, AUD/USD remains above 72c and within reach of its May high. That leaves US inflation, Treasury yields and broader risk appetite as the main near-term drivers for the Australian dollar.
View related analysis:
AU GDP Unlikely to Derail RBA Hike, AUD/USD Eyes ISM, NFP
Australian Dollar Outlook: AUD/USD Faces RBA-Fed Rate Tug-of-War
Australian Dollar Price Action Setups: EUR/NZD, GBP/AUD, EUR/AUD
FX Futures Positioning: Dollar Rebound Meets Diverging Forex Bets | COT Report
Australia This Week: Economic Data and Events for AUD/USD Traders
Australia’s slowing GDP seems unlikely to derail bets of another RBA hike, with cash rate futures having fully priced in a 25bp move by November. The 1-year OIS has fully priced in two. So attention will shift to comments from RBA’s Hunter and Hausser on Tuesday to see if any policy clues are dropped. My guess is that they’ll retain a slightly hawkish tone without committing to much more.
Consumer and business confidence seems likely to show evidence of RBA-hike concerns. Beyond that, it seems appetite for risk and the US dollar’s direction via CPI and bond auction results could be the key driver for the Australian dollar this week.
AUD/USD Technical Analysis: Australian Dollar vs US Dollar
AUD/USD Correlation Analysis
US dollar sensitivity has snapped back: AUD/USD’s correlation with USDX is -0.92 over 10 days and -0.94 over three days, making USD direction the dominant near-term driver.
The yuan remains the most consistent positive relationship: CNH/USD correlations sit at 0.75–0.84 across 3, 10 and 20-day windows, reinforcing China/yuan sentiment as an important AUD/USD input.
Risk and commodity correlations have surged very recently: three-day correlations with the S&P 500 (0.99), gold (0.95), WTI (0.94) and copper (0.87) suggest AUD/USD is currently trading with a strong risk-on/commodity beta.
Short-term relationships remain fluid: several 20-day correlations are weak despite much stronger 3- and 10-day readings, so traders should favour the relationships currently strengthening rather than rely on longer-term averages.
Source: LSEG
AUD/USD Futures Positioning: COT Report
It is more of the same story where futures exposure is concerned for the Aussie. Traders have continued to increase their longs and shorts at a gradual pace, effectively keeping net-short exposure near similar levels to the week prior, albeit a touch less bearish.
This suggests traders continued to hedge their bets despite AUD/USD climbing above 72c to a 16-week high. The more reliable signal is therefore price action and rising total open interest, which now sits at a record high. This shows us that demand for Australian dollar exposure from all participants combined is rising alongside AUD/USD prices.
Source: CFTC (COT) CME, LSEG
For traders wanting a deeper understanding of futures positioning, I’ve also published a guide on how to read and interpret weekly COT data in forex markets.
AUD/USD Options and Volatility Analysis (Risk Reversals, HVN Levels)
Implied volatility has continued to trend lower while prices have moved higher in recent weeks, while 1-month IV remains above 1-week IV to show a calm confidence in the bullish trend. A small bullish engulfing week also formed, although with the May high nearby, the rally may be maturing to the point that it needs a pause or pullback. The daily chart shows AUD/USD held up well to the strength of NFP on Friday by closing flat, although it formed a doji which shows some hesitation from bulls to push higher immediately.
The AU-US 2-year spread edged lower, though not at an alarming rate. Risk reversals also curled slightly higher last week to show a modest pickup in call demand relative to puts, so options traders are not panicking about a deep pullback.
Overall, AUD/USD still has the potential to rise towards the May high and eventually break above it. How US data lands this week could simply determine whether we see an initial pullback or a direct move towards it first.
Alt: AUD/USD rises as implied volatility falls, with risk reversals and the AU-US 2-year spread supporting a constructive Australian dollar outlook.
Source: ICE, TradingView
Australian Dollar Performance
Australian dollar performance table shows AUD gains across most major crosses, while AUD/JPY underperforms over five and 10 days.
A hot Nonfarm Payrolls report saw traders reprice the potential for a September Fed hike, making this week’s CPI and PPI figures all the more important. Fed funds futures are now back above a 60% probability of a 25bp hike in two weeks, after 162k jobs were added compared with the 53k expected.
We also have a 30-year Treasury auction which may garner more attention than usual, given the bouts of market volatility whenever its yield pushes above 5.3%. The last time it did, Treasury Secretary Scott Bessent doubled the size of long-end Treasury buybacks to provide greater liquidity support. The auction will therefore test whether investors are comfortable absorbing long-duration debt around current yields, or whether they demand an even higher premium.
Despite the renewed Fed risk, AUD/USD remains above 72c and within reach of its 2022 highs. That leaves US inflation, Treasury yields and broader risk appetite as the main near-term drivers for the Australian dollar.
View related analysis:
AU GDP Unlikely to Derail RBA Hike, AUD/USD Eyes ISM, NFP
Australian Dollar Outlook: AUD/USD Faces RBA-Fed Rate Tug-of-War
Australian Dollar Price Action Setups: EUR/NZD, GBP/AUD, EUR/AUD
FX Futures Positioning: Dollar Rebound Meets Diverging Forex Bets | COT Report
Australia This Week: Economic Data and Events for AUD/USD Traders
Australia’s slowing GDP seems unlikely to derail bets of another RBA hike, with cash rate futures having fully priced in a 25bp move by November. The 1-year OIS has fully priced in two. So attention will shift to comments from RBA’s Hunter and Hausser on Tuesday to see if any policy clues are dropped. My guess is that they’ll retain a slightly hawkish tone without committing to much more.
Consumer and business confidence seems likely to show evidence of RBA-hike concerns. Beyond that, it seems appetite for risk and the US dollar’s direction via CPI and bond auction results could be the key driver for the Australian dollar this week.
AUD/USD Technical Analysis: Australian Dollar vs US Dollar
AUD/USD Correlation Analysis
US dollar sensitivity has snapped back: AUD/USD’s correlation with USDX is -0.92 over 10 days and -0.94 over three days, making USD direction the dominant near-term driver.
The yuan remains the most consistent positive relationship: CNH/USD correlations sit at 0.75–0.84 across 3, 10 and 20-day windows, reinforcing China/yuan sentiment as an important AUD/USD input.
Risk and commodity correlations have surged very recently: three-day correlations with the S&P 500 (0.99), gold (0.95), WTI (0.94) and copper (0.87) suggest AUD/USD is currently trading with a strong risk-on/commodity beta.
Short-term relationships remain fluid: several 20-day correlations are weak despite much stronger 3- and 10-day readings, so traders should favour the relationships currently strengthening rather than rely on longer-term averages.
Source: LSEG
AUD/USD Futures Positioning: COT Report
It is more of the same story where futures exposure is concerned for the Aussie. Traders have continued to increase their longs and shorts at a gradual pace, effectively keeping net-short exposure near similar levels to the week prior, albeit a touch less bearish.
This suggests traders continued to hedge their bets despite AUD/USD climbing above 72c to a 16-week high. The more reliable signal is therefore price action and rising total open interest, which now sits at a record high. This shows us that demand for Australian dollar exposure from all participants combined is rising alongside AUD/USD prices.
Source: CFTC (COT) CME, LSEG
For traders wanting a deeper understanding of futures positioning, I’ve also published a guide on how to read and interpret weekly COT data in forex markets.
AUD/USD Options and Volatility Analysis (Risk Reversals, HVN Levels)
Implied volatility has continued to trend lower while prices have moved higher in recent weeks, while 1-month IV remains above 1-week IV to show a calm confidence in the bullish trend. A small bullish engulfing week also formed, although with the May 2022 high nearby, the rally may be maturing to the point that it needs a pause or pullback. The daily chart shows AUD/USD held up well to the strength of NFP on Friday by closing flat, although it formed a doji which shows some hesitation from bulls to push higher immediately.
The AU-US 2-year spread edged lower, though not at an alarming rate. Risk reversals also curled slightly higher last week to show a modest pickup in call demand relative to puts, so options traders are not panicking about a deep pullback.
Overall, AUD/USD still has the potential to rise towards the May high and eventually break above it. How US data lands this week could simply determine whether we see an initial pullback or a direct move towards it first.
Alt: AUD/USD rises as implied volatility falls, with risk reversals and the AU-US 2-year spread supporting a constructive Australian dollar outlook.
Source: ICE, TradingView
Australian Dollar Performance
Australian dollar performance table shows AUD gains across most major crosses, while AUD/JPY underperforms over five and 10 days.
The AUD/JPY cross trades in positive territory near 112.80 during the early European trading hours on Friday. However, the potential upside for the cross might be limited as traders ramped up bets on a Bank of Japan (BoJ) interest rate hike, boosting the Japanese Yen (JPY).
BoJ board member Hajime Takata said on Wednesday that the central bank should conduct interest rate hikes nimbly to counter intensifying inflationary pressures, rather than adhere to a fixed semiannual pace anticipated by markets. Analysts believe the Japanese central bank could be more hawkish than previously expected when it meets on September 17 to 18.
“This feels less like a short squeeze and more like the market cautiously reassessing a more hawkish BOJ path,” said Masahiko Loo, senior fixed income strategist at State Street Investment Management in Tokyo. “Markets are finally starting to buy into the idea that Japan may continue normalizing policy into 2027,” Loo added.
Yen outlook tempered as BNY questions power of intervention aloneStrategists at BNY caution that, despite recent official action, they "remain skeptical that Japanese authorities can generate sustained JPY appreciation through intervention alone." They argue that the government’s policy stance "remains reflationary," and that "today’s backdrop is very different from the early Abenomics period: inflation is already materially higher and structural reform is less prominent." Even so, BNY stresses that this does not automatically imply further currency weakness, noting that "does not mean the yen must weaken further."
Technical Analysis: AUD/JPY remains capped under the 100-day SMAIn the daily chart, AUD/JPY holds a bearish near-term tone as it slips beneath the 100-day simple moving average (SMA) and the Bollinger middle band. This positioning suggests rallies are being capped by the cluster of overhead averages, while the Relative Strength Index (14) around 45 hints at fading upside momentum rather than outright oversold conditions.
On the topside, initial resistance comes at the 100-day SMA around 113.20, followed closely by the Bollinger middle band near 113.40. A sustained break above these levels would be needed to ease the current downside pressure, with the upper Bollinger band near 115.05 as a more distant cap.
On the downside, the lower Bollinger band, now sitting near 111.80, acts as the next key support zone. Any follow-through selling below this level could expose the July 3 low of 111.33, followed by the August 4 low of 110.01.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Australian Dollar FAQs One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
Sell AUD/USD. Higher odds of both RBA and Fed hikes push the market toward tighter USD policy and less room for AUD to rally; strong Aussie data is already “priced,” while the article flags elevated inflation and renewed oil/energy pressure that can keep both central banks hawkish. Technicals also point to a bearish reversal (rising wedge convergence, PPO bearish crossover, RSI rolling over). Target 0.700 support.
Key Risk: A sharp risk-off move that weakens the USD (or a surprise dovish Fed/RBA shift) that drives AUD/USD back above 0.7207.
Brent-linked AUD
Sell AUD exposure via AUD/JPY (or AUD futures). The news ties the hawkish rate repricing to higher oil after US-Iran activity; that supports global growth but also keeps inflation sticky, which tends to keep JPY relatively supported versus high-beta AUD when rates are uncertain. With AUD/USD set up to break lower, AUD/JPY should follow on the same rate-and-risk repricing.
Key Risk: Oil spikes further and triggers a broad commodity/risk rally that lifts AUD/JPY despite the wedge/oscillator bearish setup.
The Australian dollar held firm today, September 3rd, as investors adjusted their RBA and Federal Reserve expectations for the year. The AUD/USD pair was trading at 0.7165, a few points below the August high of 0.7207.
Traders are bracing for interest rate hikes from the Federal Reserve and the Reserve Bank of Australia (RBA) happening as soon as this month.
Polymarket gives the odds of RBA’s rate hike happening in September rose to 67%. These odds jumped after the US and Iran resumed their kinetic activity, which led to higher oil prices.
Australia has also published strong macro numbers this week. An S&P Global report showed that the services PMI came in at 53.2 in August, higher than the expected 52.9. A PMI reading of 50 and above is usually a sign that a sector is growing. The composite PMI came in at 52.7, also higher than the expected 52.50.
Another report released on Wednesday showed that the Australian economy expanded by 2.1% in the second quarter, higher than the expected 1.8%. It grew by 0.4% in Q2 after growing by 0.3% in Q1 on a QoQ basis.
This growth happened even as the Reserve Bank of Australia (RBA) became the most hawkish central banks this year. It has already delivered three rate hikes this year, with officials leaving the door open for more hikes.
A key concern is that Australia’s inflation has remained at an elevated level in the past few months. This trend will likely continue now that the US and Iran have restarted their kinetic activity, leading to higher energy prices. Brent, the global benchmark, rose to $95.68, while the West Texas Intermediate (WTI) rose to $91.
The same situation is happening in the US, where odds that the Fed will hike rates this month have jumped to 55% on Polymarket. These odds soared after Kevin Warsh delivered a highly hawkish statement at the Jackson Hole Symposium.
In it, he hinted that the bank was concerned about the state of inflation, which has remained above the 2% target in the past five years.
Focus now shifts to the upcoming US nonfarm payrolls (NFP) report that will provide color on the labor market. Economists expect the data to show that the economy created over 80k jobs in August this year.
AUDUSD chart | Source: TradingView
The daily chart shows that the AUD/USD pair may be on the verge of a bearish reversal in the coming days. For one, it has formed a rising wedge pattern whose two lines are about to converge.
Also, the two lines of the Percentage Price Oscillator (PPO) have made a bearish crossover, while the Relative Strength Index is pointing downwards.
Therefore, the most likely scenario is where the AUD/USD pair falls, potentially to the key support of 0.700.
The AUD/JPY cross trades in a positive territory near 114.60 during the early European session on Tuesday. Stronger-than-expected Chinese economic data provides some support to the China-proxy Australian Dollar (AUD) against the Japanese Yen (JPY).
Data released by RatingDog on Tuesday showed that China’s Manufacturing Purchasing Managers' Index (PMI) jumped to 51.5 in August from 50.9 in July. This figure came in above the market consensus of 50.9.
On Japan’s front, markets are now pricing in nearly a 73% probability of a hike from the Bank of Japan (BoJ) later this month, but analysts suggest there needs to be a much stronger follow-through by the central bank.
"For the yen, a September BOJ hike is already heavily anticipated," said Charu Chanana, chief investment strategist at Saxo.
Yen support tempered as BoJ struggles to out-hawk market pricingOCBC FX strategists Sim Moh Siong and Christopher Wong note that the Japanese Yen has already drawn substantial support from “aggressive market pricing for Bank of Japan (BoJ) tightening,” with an implied “85% chance of a September hike.” They point out that “a September move would break from the BoJ's pattern in the current tightening cycle, where rate increases have typically come about every six months,” given that “the last hike was delivered in June.” However, they caution that “it will be difficult for the BoJ to out-hawk market expectations,” arguing that further JPY gains may increasingly depend on additional policy tools beyond rate increases, including measures to encourage repatriation of overseas assets, as the BoJ faces constraints on how far and how fast it can raise rates.
Technical Analysis: AUD/JPYIn the daily chart, AUD/JPY maintains a bullish near-term bias as price holds firmly above the 100-day moving average (MA) and the Bollinger Bands’ 20-period simple moving average, suggesting underlying demand after the recent advance. The Relative Strength Index (14) at 63.92 leans toward bullish momentum without yet signaling extreme overbought conditions, hinting that upside pressure could persist while these supports remain intact.
On the topside, immediate resistance emerges at the August 28 high of 114.96. The next hurdle is seen at the Bollinger upper band near 115.30, where buying interest could start to fade and encourage consolidation.
On the downside, critical support level is located in the 113.25-113.20 zone, creating a tight demand zone. The next contention level to watch is the August 20 low of 112.52. A deeper pullback would expose the lower Bollinger band around 111.05.
(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.
AUDJPY currency pair recently reversed from the resistance zone between the long-term resistance level 115.00 (which has been reversing the price from April) the upper daily Bollinger Band.
The downward reversal from this resistance zone stopped the previous intermediate impulse wave (3).
Given the strength of the resistance level 115.00 and the overbought daily Stochastic, AUDJPY currency pair can be expected to fall to the next support level 113.45.
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The AUD/JPY cross trades in negative territory around 114.50 during the early European session on Monday. The Japanese Yen (JPY) strengthens against the Australian Dollar (AUD) as Japan’s annual core Consumer Price Index (CPI) inflation in Tokyo rose for a third consecutive month in August, reinforcing expectations that the Bank of Japan (BOJ) could raise interest rates as early as September.
Hotter inflation data came after BoJ Deputy Governor Ryozo Himino delivered hawkish remarks and highlighted growing inflation risks. Most market participants currently expect the Japanese central bank to raise its policy rate to 1.25% at its upcoming policy meeting.
On the other hand, upbeat China’s Manufacturing Purchasing Managers' Index (PMI) data could provide some support to the China-proxy Aussie as China is a major trading partner to Australia.
Data released by the National Bureau of Statistics (NBS) on Monday showed that China’s Manufacturing PMI climbed to 49.8 in August from 49.2 in July. This figure came in stronger than the 49.7 expected. The NBS Non-Manufacturing PMI steadied at 49.0 in August, compared to July’s 49.0 figure.
BoJ stance seen remaining hawkish as inflation dynamics evolveAnalysts at Societe Generale argue that the latest inflation dynamics, including the mix of softer non-fresh food prices and firmer services costs, “continue to support the BoJ’s hawkish path,” reinforcing expectations that the central bank will maintain its tightening bias despite temporary downward pressure from renewed energy subsidies.
Technical Analysis: AUD/JPY keeps a constructive tone above the 100-day SMAIn the daily chart, AUD/JPY retains a bullish near-term bias as spot holds above the 100-day simple moving average (SMA) and the Bollinger middle band. Price action is pressing into the upper half of the Bollinger envelope, with the upper band acting as immediate overhead supply, while the 14-day Relative Strength Index at 63.27 stays in positive territory, hinting at sustained buying pressure rather than outright overbought conditions.
On the downside, initial demand is seen at the August 26 low of 113.66. The next contention level is located at the 100-day SMA at 113.25, followed by the the Bollinger middle band at 113.00.
On the topside, any follow-though buying above the August 26 high of 114.96 would open the door for the Bollinger upper band at 115.20. The next hurdle to watch is the 116.00 psychological level.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Canadian Dollar FAQs The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
TL;DR: Japan’s data is strengthening and Australia’s is weakening, yet AUD/JPY keeps rising — because the cross is trading on the global yield backdrop and carry differential, not on either country’s local fundamentals.
Domestic Data Point Clearly Lower for AUD/JPY AUD/JPY has rebounded strongly even though this week’s data from both sides of the cross argue for the opposite move. Japan delivered firmer inflation and stronger business activity. Australia produced a weak jobs report and softer PMIs. On domestic fundamentals alone, that combination should favor the Yen over the Aussie.
Japan’s July core CPI rose from 1.6% to 1.8% y/y, while core-core CPI accelerated from 1.7% to 1.9% — a broadening that ActionForex covered in detail here, noting firmer services inflation and renewed energy pressure ahead of the BoJ’s September meeting. August PMIs strengthened as well: PMI Manufacturing rose from 54.5 to 55.1, while PMI Services climbed from 51.2 to 52.3 — part of a broader acceleration where overseas demand posted its strongest growth in more than eight-and-a-half years, led by semiconductor and AI-related industries. Those readings reinforce expectations the BoJ could raise rates again at its September meeting.
Australia moved in the opposite direction. Employment fell -15.8K in July, against expectations for an increase, while unemployment rose from 4.4% to 4.5%. August PMI Composite Output then eased from 53.2 to 52.5, while PMI Services Business Activity fell from 53.6 to 52.9. PMI Manufacturing Output slipped from 50.3 to 49.7, moving back into contraction, even as manufacturing orders improved and cost pressures accelerated.
Global Yields Are Overriding Local Fundamentals That AUD/JPY is rising anyway is the more important signal. The cross is currently trading less on Australian and Japanese data than on the global yield backdrop.
The Yen briefly benefited after the US Treasury’s August 19 buyback announcement drove long-dated US yields sharply lower. That compressed yield differentials globally and temporarily reduced pressure on low-yield funding currencies. But the move didn’t last — US yields rebounded quickly on Thursday, with the 10-year Treasury yield returning toward 4.70% and the 30-year yield moving back above 5.20%. Other major sovereign yields also rose. As carry conditions improved again, the Yen returned to underperformance.
That mechanism matters more for AUD/JPY than the latest local data. When global yields rise, the opportunity cost of holding a low-yielding currency such as the Yen increases. Carry demand then tends to favor currencies offering substantially higher policy rates, including the Aussie.
BoJ Hike Bets Are Rising, But the Carry Gap Is Still Wide Japan’s stronger CPI and PMI data still matter because they reinforce September BoJ hike expectations. But even another 25bp increase wouldn’t transform the relative-rate picture.
The RBA cash rate stands at 4.35%, compared with the BoJ policy rate at 1.00% — a gap of roughly 335bp. A BoJ hike to 1.25% would narrow it to around 310bp, still a substantial spread.
That helps explain why the Yen can weaken even as BoJ normalization expectations strengthen. Markets may be becoming more confident that Japan will hike, but the expected adjustment is still small relative to the existing carry advantage. Australia’s softer data could eventually narrow that gap from the other side if markets become convinced the RBA’s tightening bias won’t survive. But this week’s releases haven’t been enough to overpower the global yield move.
ActionForex’s Technical View on AUD/JPY Technically, the current rebound supports the view that the correction from 114.91 completed with three waves down to 109.25. That decline held above 108.77, the bottom of wave four of a lesser degree. Support from the 55-day EMA also strengthens the bullish interpretation.
The near-term outlook stays bullish while 112.21 support holds. The next target is the 114.65–114.91 resistance zone.
A decisive break of 114.91 would be much more important. It would confirm resumption of the larger uptrend from 86.03, the 2025 low. The next upside target would then be the 38.2% projection of 86.03 to 114.91 from 109.25, at 120.28, putting the psychological 120 level directly into focus.
A move below 112.21 would delay the bullish case and suggest the correction from 114.91 is still unfolding, with another near-term decline possible before the broader uptrend resumes.
AUD/JPY Is Sending a Global, Not Domestic, Signal The key takeaway isn’t that Australian fundamentals suddenly improved or that Japanese data failed to matter. It’s that both local stories are being overwhelmed by a larger market force. Japan is getting stronger. Australia is getting softer. Yet AUD/JPY is rising because global yields have reasserted the carry advantage over the Yen.
That makes the next move in US and global bond yields more important for this cross than another small change in local data. As long as carry pressure stays elevated and 112.21 holds, AUD/JPY can keep pressing toward 114.91 despite a domestic macro backdrop that, on paper, argues for the opposite.
Key Takeaways Japan’s core-core CPI accelerated to 1.9% and PMIs strengthened broadly, while Australia’s jobs report contracted and PMIs softened — a combination that should favor Yen, not Aussie. AUD/JPY’s rise despite this divergence signals the cross is trading on global yields and carry conditions, not local fundamentals, right now. The RBA-BoJ rate gap stands at roughly 335bp; even a September BoJ hike to 1.25% would only narrow it to around 310bp, preserving a substantial carry advantage for AUD. US yields briefly fell on the Treasury buyback announcement but rebounded quickly, restoring carry pressure on the Yen within days. AUD/JPY holds a bullish bias above 112.21 support, targeting 114.65-114.91; a break above 114.91 would open a path toward 120.28.
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The AUD/JPY cross trades in positive territory near 113.55 during the early European session on Friday. The Australian Dollar (AUD) strengthens against the Japanese Yen (JPY) despite the cooling labor market. The minutes of the Reserve Bank of Australia (RBA) meetings will be released next Tuesday.
Australia's Unemployment Rate ticked up to 4.5% in July from 4.4% in June, the Australian Bureau of Statistics showed on Thursday. Meanwhile, employment unexpectedly fell by 15,800 jobs in July, versus a rise of 80,200 prior, worse than the market expectations of a 15,000 growth. The weaker jobs data has led markets to scale back expectations for further aggressive interest rate hikes by the Reserve Bank of Australia (RBA).
“The rise in unemployment marginally strengthens the case for the RBA to hold, particularly given broader signs of weakness in the economy,” said Ray White chief economist Nerida Conisbee.
Ashwin Binwani, Alpha Binwani Capital’s founder, said institutional investors remained positioned in carry trades against a basket of G10 currencies, led by the AUD. There are also signs that some traders are rebuilding bearish bets on the JPY, as the impact of the intervention has faded.
Standard Chartered pulls forward BoJ hike call to SeptemberAnalysts at Standard Chartered have brought forward their expectations for the Bank of Japan’s next policy move, now projecting that the BoJ will “hike by 25bps on 18 September from October previously.” This revision marks a shift in the bank’s anticipated timing of Japan’s rate normalisation, underscoring a slightly more front-loaded tightening profile than previously assumed.
Technical Analysis: The bullish tone of AUD/JPY remains intactIn the daily chart, AUD/JPY retains a constructive bullish bias as it holds above the 100-day simple moving average (SMA) and the Bollinger Bands’ middle line, suggesting underlying demand on dips after the latest pullback from recent highs. The Relative Strength Index (RSI) at 58.12 stays in positive territory but below overbought levels, hinting at steady bullish momentum without signs of exhaustion yet.
On the topside, initial resistance emerges at the July 22 high of 114.40, en route to the upper Bollinger Band near 114.75. The next hurdle to watch is the 115.00 psychological level, where buyers could face profit-taking and short-term supply.
On the downside, immediate support is seen at the 100-day SMA at 113.10, followed by the Bollinger middle band at 112.45. A deeper setback would expose the August 10 low of 111.63, and then the lower Bollinger Band as a more distant support level around 110.15.
(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.
AUDJPY has turned nicely lower recently after it made five waves up and confirmed a temporary top around 113.60, as the market came down and broke the channel support this week. Now it looks like we are in a stage for a deeper ABC correction. Usually, it will take us back to the area of the previous wave four, which is already the case, but now that we have a minimum three-wave correction, this setback could continue for a bit longer before it finds some deeper support and completes this corrective wave two setback, maybe next week. That's when we could start seeing some new interesting rebound on this pair, especially if stocks remain in bullish mode, which I personally still see as being in some intraday consolidation.
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The AUD/JPY has pulled back after a strong uptrend, with the momentum attributed to short-term profit-taking. However, the pair’s broader uptrend remains intact Joint interventions have not helped the yen much and stubborn inflation is a significant concern for Japan’s policymakers Despite the recent dip, the wide interest rate gap between the RBA and BoJ continues to favour carry trade in the long-term The AUD/JPY currency pair climbed for over ten straight days from its early August low around 110.14. It started falling on Tuesday, though, and has kept dropping into today’s trading session.
Earlier this month, the pair rose from roughly 110-111 to a high near 113.27-113.65. It’s since dropped, however, to about 112.64-112.72. This move signals a break in the prior upward trend.
So, is this the start of a bigger downtrend? What’s making the yen stronger? And what does it mean for carry traders?
Is Momentum Shifting Lower? Recent price movements point to a short-term pause, not a full trend reversal. The pair still trades above important long-term moving averages across various analyses, and the overall trend since the August lows still suggests a recovery.
However, technical indicators on medium-term charts, however, look more cautious. Some suggest short-term selling pressure has built up after the rapid ascent.
The Relative Strength Index (RSI) on daily charts has moved back toward the 50-52 range. This doesn’t automatically signal a bearish divergence. Instead, it likely shows the pair correcting from overbought conditions after a long period of gains
Reuters reports the Bank of Japan (BOJ) is getting ready to raise interest rates as early as its September 17-18 meeting. Policymakers might even speed up the pace of hikes beyond the current rate of about twice a year.
Policymakers are reportedly growing more concerned about ongoing inflation, strong global demand driven by AI, and the yen’s persistent weakness, even after joint currency interventions. Bank of America has even raised its year-end forecast for the yen, noting intervention needs faster rate hikes to be truly effective.
Implications for Carry Traders The AUD/JPY is among the most popular currency pairs in carry trade. Traders usually borrow Japanese yen, with its low interest rates, to buy the Australian dollar, which offers higher returns. This rate difference made the pair appealing over the last year. But when the exchange rate falls, that advantage shrinks, and traders often adjust their positions.
If you’re already holding long-carry positions, the recent drop means your investments are worth less on paper. It also raises the risk of further selling if prices keep falling. If the carry trade loses its appeal, some investors might trim their holdings or look to hedge more.
On the other hand, if the pair stabilizes or starts to climb, the carry trade strategy will regain its appeal. This is especially true if Australian economic data stays strong and the Bank of Japan slowly tightens its monetary policy. When these shifts happen, the pair can become more volatile as traders adjust their leveraged positions.
Has AUD/JPY momentum clearly turned bearish?
It is not yet confirmed. The current decline follows a strong multi-session rally and looks like consolidation before a potential break of key support.
What is driving the yen’s recent strength?
Market expectations for a Bank of Japan rate hike are up, there are lingering effects from late-July intervention, and policy outlooks differ when compared to Australia.
How does this affect carry trades?
A falling AUD/JPY cuts the profit from borrowing yen to hold Australian dollars. This can prompt leveraged traders to reduce their positions.
The AUD/JPY cross trades in positive territory near 113.00 during the early European session on Monday. The Japanese Yen (JPY) softens against the Australian Dollar (AUD) amid weaker-than-expected Japanese Gross Domestic Product (GDP) data.
Japanese GDP for the second quarter (Q2) expanded at an annualised 1.1%, according to the Cabinet Office on Monday. This figure came in below the market consensus of 2.0% and the first quarter’s reading of 1.8% growth, compared to a 0.5% growth recorded in Q1 and missed market expectations of a 0.5% expansion.
"The details were a mixed bag," Capital Economics analysts wrote in a research note. "GDP expanded at a decent pace in Q2, and with the government still limiting the pass-through from higher energy prices," they wrote, while a jump in government consumption "suggests that Takaichi’s expansionary fiscal policies are starting to have an impact."
Traders await the release of the Australian July employment report on Thursday ahead of Japan’s National Consumer Price Index (CPI) inflation data. Economists expect the Unemployment Rate in Australia to rise to 4.5% in July from 4.4% in June. If the report shows a stronger-than-expected outcome, this could lift the Aussie against the JPY.
Japan data in focus as Deutsche Bank flags solid Q2 growth and firmer inflationEconomists at Deutsche Bank highlight a busy week for Japan, with “key economic data” due including Q2 GDP on Monday and the national CPI on Friday. For GDP, the bank notes that its Chief Japan Economist expects “real GDP to grow at +1.6% QoQ,” while on prices he “forecasts core CPI ex. fresh food to rise to 1.8% YoY from 1.6% in June and core-core inflation ex. fresh food and energy to increase to 1.8% (1.7%).” The bank directs clients to “see more in his full week-ahead” for additional detail.
Technical Analysis: AUD/JPY keeps a mildly positive momentum tone in the near termIn the daily chart, AUD/JPY holds a constructive bullish bias as it sits above the Bollinger middle band and the 100-day simple moving average. The clustering of these supports just beneath spot suggests dips are being absorbed, while the 14-day Relative Strength Index around 54 keeps a mildly positive momentum tone without yet signalling overbought conditions.
On the downside, initial support is seen at the July 8 low of 112.21, followed by the August 10 low of 111.63. The next contention level is seen at the lower Bollinger band near 110.00, which acting as a deeper bearish target if selling accelerates.
On the topside, the immediate resistance to watch is the July 16 high of 113.88, en route to the July 27 high of 114.67. A clear break would open the door to the upper Bollinger band at 115.35.
(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.
The AUD/JPY cross trades in negative territory around 112.55 during the early European trading hours on Friday. The Japanese Yen (JPY) strengthens against the Australian Dollar (AUD) as traders remain on high alert for further currency intervention from Japanese authorities.
Japan's former top currency diplomat, Mitsuhiro Furusawa, said on Thursday that Tokyo may conduct joint JPY intervention with the United States "at any time" and should signal the chance of faster-than-expected interest rate hikes to arrest the currency's slide.
Markets currently see a 76% chance of the Bank of Japan (BoJ) rate hike in September, according to Tokyo Tanshi data, compared with 24% on July 30.
Yen undervaluation seen easing after Japan–US interventionDBS Group Research notes that the Japanese Yen’s mispricing has started to correct in the wake of recent official action. According to the bank, “the Japanese yen's (JPY) undervaluation has narrowed from record levels following Japan's second FX market intervention this year, which was conducted in co-ordination with the US,” underscoring the impact of rare, joint efforts by Japan and the US to rein in excessive JPY weakness.
Technical Analysis: AUD/JPY remains capped under the 100-day SMAIn the daily chart, AUD/JPY holds below the Bollinger middle band and the 100-day moving average, keeping the near-term bias bearish as price is capped beneath these overlapping resistance lines. The Relative Strength Index (14) at 50.43 is neutral, suggesting a consolidative tone rather than strong directional momentum while downside risks remain dominant as long as the cross stays under the 100-day average.
On the topside, immediate resistance is clustered around the Bollinger middle band at 112.70, followed by the 100-day moving average at 112.90. A daily close above these levels would be needed to ease selling pressure and open the way toward the July 27 high of 114.67, en route to the Bollinger upper band near 115.40.
On the downside, initial support emerges at the August 10 low of 111.63. The key contention level is seen at the Bollinger lower band at 110.00, where a break would signal a deeper corrective phase toward the lower end of the recent range.(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.
AUD/JPY rose for seven straight sessions but slipped about 0.2% today as the yen strengthened on intervention fears and BoJ hike expectations Japan and the US conducted a rare coordinated yen-buying intervention in early August, the first such joint action since 2011 The wide Australia-Japan interest-rate gap still underpins the carry trade. However, there is a rising likelihood of a near-term volatility from policy signals The Australian dollar’s recent upward trend against the Japanese yen has been a significant topic in foreign exchange markets. A seven-session winning streak is a notable achievement for any currency pair, particularly one often viewed as an indicator of market risk sentiment.
However, this streak ended today. The AUD/JPY pair saw a decline of approximately 0.2% during New York trading, settling around 112.37 compared to a previous close of 112.60. This shift raises questions about the underlying causes and whether this marks a more substantial change or a temporary pullback.
Yen Intervention Risk Hasn’t Gone Away The most important piece of context here is what happened just two weeks ago. Japan and the United States confirmed a rare, coordinated yen-buying intervention, aiming to stop the currency’s slide to 40-year lows. Tokyo signaled it’s ready to act again if needed.
This wasn’t just any intervention. It was the first joint effort since 2011, and the market can’t simply ignore it. US Treasury Secretary Scott Bessent reinforced that message, stating Washington “won’t hesitate to participate in further joint intervention.” He also pushed for more rate hikes from the Bank of Japan. That combination creates a persistent headwind for anyone holding long AUD/JPY positions.
The yen also strengthened after traders looked at the Bank of Japan’s recent Summary of Opinions. BoJ members pointed out growing risks of domestic inflation, leading some to think that Japanese officials might raise interest rates again, possibly in September.
What Does This Mean for the Carry Trade? AUD/JPY has long been a favourite among carry traders. AUD/JPY has long been a favorite among carry traders. This strategy works best when Australian rates stay high (or rise) and the yen remains weak and stable. Today’s price action suggests both pillars are wobbling a bit.
It looks like the period of easy gains during the rally might be turning into a trading range. As the BoJ moves closer to normalizing its policies and yields on long-term Japanese government bonds rise, the net return from the interest rate difference becomes less protected from sudden currency dips.
How to Position From Here? None of this necessarily signals the rally is over. Seven consecutive days of gains represent a strong upward move, and a single 0.2% dip is within the normal range for profit-taking. However, traders should now consider the risk of intervention as a consistent element for this currency pair, rather than an isolated event.
This suggests adopting tighter stop-losses and smaller position sizes for any new long entries, rather than aggressively pursuing new highs. Longer-term investors who can tolerate market fluctuations may still find the interest rate differential appealing. It is advisable to maintain strict stop-losses around upcoming speeches by Reserve Bank of Australia officials and releases of Japanese inflation data to mitigate potential volatility.
Why did AUD/JPY fall about 0.2% today after seven session gains?
The Japanese yen got a slight lift today. New intervention warnings surfaced, and people are increasingly expecting a Bank of Japan rate hike this September.
What still supports the AUD/JPY carry trade?
Australia’s cash rate is higher than Japan’s policy rate, creating a big interest-rate difference. This still makes holding the Australian dollar attractive.
How significant is the recent US-Japan intervention?
That coordinated action in late July did give the yen a short-term boost, but its impact has mostly faded. The carry trade now looks attractive once more.
The AUD/JPY cross trades in negative territory near 112.35 during the early European session on Thursday. The Japanese Yen (JPY) edges higher against the Australian Dollar (AUD) as traders are on high alert for further intervention from authorities. Reserve Bank of Australia (RBA) Governor Michele Bullock is scheduled to speak later on Friday.
Goldman Sachs Research strategist Karen Fishman said that the JPY’s gains are now fading as the intervention is “not a sustainable fix ... ultimately just buys some time.”
Meanwhile, the Bank of Japan (BoJ) highlighted growing risks of accelerating inflation in its summary of opinions from the July meeting, with one board member suggesting that the pace of interest rate hikes could accelerate. The BoJ may consider an additional interest rate increase at its next September policy meeting, following a hike in June, in response to rising risks of higher inflation, according to Jiji.
Rare US-Japan FX action underscores shifting Yen dynamicsDBS Group Research underscores the unusual nature of the latest currency support measures, noting that “co-ordinated FX intervention between the US and Japan is rare, with the last joint intervention occurring 15 years ago to weaken an excessively over-valued JPY in the aftermath of the 2011 Tohoku earthquake.” The team highlights that this historical precedent throws the current episode into sharper relief, with policymakers now deploying similarly uncommon tools in response to pronounced Yen weakness rather than strength.
Technical Analysis:In the daily chart, AUD/JPY leans into a bearish near-term bias as it slips back under the Bollinger Bands 20-period simple moving average and remains capped by the 100-day simple moving average (SMA). Price is still comfortably above the Bollinger lower band, so the broader uptrend is not yet threatened, but the latest Relative Strength Index (14) reading at 48.96 suggests momentum has turned neutral-to-soft after the recent rally stalled near the upper band zone.
On the topside, initial resistance is aligned at the Bollinger Bands 20-period SMA middle line around 112.70, followed by the 100-day SMA at 112.90. A sustained break above these levels would be needed to re-open the path toward the July 16 high of 113.88, en route to the upper Bollinger band near 115.45.
On the downside, the primary support to watch sits at the August 10 low of 111.63. The next contention level to watch is the August 7 low of 110.77, followed by the Bollinger lower band at 110.00, where a decisive move would hint at a deeper corrective phase within the broader trend.
(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.
The AUD/JPY cross trades in negative territory around 111.15 during the early European trading hours on Thursday. A coordinated currency intervention by the United States (US) and Japan provides some support to the Japanese Yen (JPY) against the Australian Dollar (AUD).
Traders remain on high alert for further intervention from Japanese authorities. Japan's Finance Minister Satsuki Katayama said earlier this week that officials will not hesitate to take further action on currency.
Bank of Japan (BoJ) Minutes on Wednesday showed that policymakers debated mounting price risks that likely required more rate hikes even as they raised borrowing costs to a 31-year high in the June policy meeting.
Australia posted a surprise trade surplus in June as commodity exports gained, the Australian Bureau of Statistics revealed on Thursday. Exports rose by 9.6% MoM in June from a fall of 7.6% seen a month earlier (revised from 6.9%). Meanwhile, Imports decreased by 0.2% MoM in June, compared to an increase of 0.9% seen in May (revised from 2.6%).
Fx market braces for further Japan intervention as Dollar strategy evolvesSociete Generale strategists caution that, in the context of recent US-Japan coordination on the Yen, history offers a clear warning: “a single round of intervention is unlikely to be sufficient to turn the trend around, and the FX market is on high alert for the next move.” This underscores their view that the latest action is best seen as one step in a broader, ongoing strategy rather than a definitive turning point for JPY.
Technical Analysis: AUD/JPY maintains a bearish tone on the daily chartIn the daily chart, AUD/JPY keeps a bearish near-term bias as the pair holds beneath the 100-day simple moving average (SMA) and the Bollinger middle band. The Relative Strength Index (14) at 38.81 remains below the neutral 50 line, suggesting subdued but not oversold momentum after the recent slide.
On the topside, initial resistance emerges at the 100-day SMA around 112.80, followed closely by the Bollinger middle band at 112.90, forming a tight cap that would need to be reclaimed to ease downside pressure. Any follow-throght above this level could pave the way to the July 27 high of 114.67, en route to the upper Bollinger band higher up near 115.65 as a more distant barrier.
On the downside, the lower Bollinger band at 110.15 offers the next notable support. A decisive break beneath this floor could expose the 100.00 psychological level, followed by the August 3 low of 109.24.
(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.
The AUD/JPY forex pair has declined sharply since late July and for a carry trade favourite, investors are weighing how to position themselves The Australian dollar has seen a significant depreciation against the Japanese yen since late July. The AUD/JPY exchange rate declined from approximately 114.50 to lows between 109 and 110. While a rebound of over 1% yesterday pushed the pair above 111, it has since eased again.
These movements are influenced by differing central bank policies, the potential for intervention, and evolving market expectations for both the Reserve Bank of Australia (RBA) and the Bank of Japan (BoJ).
What Drove AUD/JPY Sell-off and Rebound? The sharp decrease in AUD/JPY during late July primarily resulted from a global unwinding of yen-funded carry trades. Previously, market participants borrowed yen at low interest rates to invest in currencies offering higher yields, such as the Australian dollar. However, market changes necessitated a rapid liquidation of these leveraged positions, leading to substantial buying of the yen across major currency pairs.
A notable factor emerged on July 30 when a rapid appreciation of the yen against major currencies led to widespread market speculation of official intervention by Japanese authorities. The AUD/JPY pair dropped more than 1.3% on that day and continued its downward trend in the following sessions, reaching its lowest point in several weeks.
Although Tokyo has not officially confirmed intervention, the magnitude of the currency move, combined with prior warnings regarding excessive yen weakness, provided strong indications to traders.
Yesterday’s temporary 1.0% rebound was sparked by a short-term resurgence in global equity markets and a temporary stabilization in risk appetite.
But the pair couldn’t hold onto those gains during today’s trading, which showed how vulnerable it still is. Softer commodity prices, particularly crude oil and industrial metals, have kept the growth-sensitive Aussie dollar struggling.
Near-Term Momentum and Outlook Yesterday’s rebound proved the pair can still draw buyers when the yen eases up or broader risk appetite improves. But since it couldn’t hold onto those gains today, it seems the risk of intervention is still capping any rise.
Traders are now looking ahead to the RBA’s next decision and any further signals from the BoJ, like the summary of opinions and upcoming Japanese inflation data.
In the near term, AUD/JPY might trade in a wider range. Support could hold near recent lows of 109-110, with resistance possibly around 112-113. For a lasting recovery, we’d need clearer signs that Japanese authorities are stepping back, and that Australian data actually back up the current yield advantage.
On the other hand, more yen strength or a dovish shift in RBA expectations could extend the decline.
Over the medium term, the outlook depends on how quickly policies adjust. If the BoJ speeds up normalization while the RBA remains on hold, the yield gap would narrow and favor the yen.
If Australian inflation proves more persistent and Japanese tightening remains gradual, carry demand could reassert itself and lift the pair once intervention fears calm down.
What caused the AUD/JPY to drop sharply at the end of July?
It fell fast because yen-funded carry trades were quickly unwound, and global commodity prices cooled down.
How are the Reserve Bank of Australia and the Bank of Japan affecting the AUD/JPY right now?
The RBA has stopped raising rates, and the Bank of Japan is starting to normalize its policies. This means the difference in interest rates between Australia and Japan is getting smaller.
Why did the AUD/JPY suddenly jump 1% yesterday?
Yesterday’s quick rise happened because global stock markets temporarily bounced back, and investors felt a bit more willing to take risks for a short while.
Improving risk sentiment helped lift the Australian dollar after easing Middle East tensions and stronger US economic data. While AUD/USD, AUD/JPY and AUD/NZD all advanced, each cross is approaching important technical levels that could determine whether the rally extends or fades.
View related analysis:
Gold Price Outlook: Can Quiet Accumulation Trigger a Breakout? Japanese Yen Outlook: USD/JPY Plunge Loses Steam, but Risks Remain USD at a Crossroads: Can EUR/USD and AUD/USD Extend Their Gains? FX Futures Positioning: Yen, Euro Bears Caught Short | COT report Risk Sentiment Drives the Australian Dollar Higher Middle East Optimism Lifts Global Risk Sentiment Prospects that the Strait of Hormuz could reopen boosted risk appetite on Tuesday, lifting Wall Street sentiment. ISM manufacturing PMI also edged higher to 55.6 from 53.3. Employment expanded, new orders ticked higher and prices paid ticked lower, albeit from elevated levels. The S&P 500 and Dow Jones reached record highs, while the Nasdaq closed in on 30,000. The SPI 200 rose 0.4% overnight, which should see the ASX 200 gap higher and place its all-time high within a day's typical trading range.
Antipodeans Lead as Yen Lags AUD/USD and NZD/USD were the strongest FX majors as the antipodeans embraced the positive lead from the Middle East headlines. Whether that proves to be another false start, however, risks reversing that sentiment. The Japanese yen was the weakest FX major, although its losses were marginal as traders likely remained wary of betting against the combined might of the MOF and the Fed. USD/JPY edged higher in line with yesterday's bias, although resistance emerged around the first zone, which includes the 200-day moving averages near 157.80. I suspect bears are seeking evidence of swing highs around resistance levels, with 158.00, 159.00 and 159.40 the main contenders.
Source: LSEG
Australian Dollar Technical Setups AUD/USD Presses Against Key Resistance The Aussie has so far held up well against the US dollar's mild bullish retracement. Given the AU-US two-year yield spread has risen so far this week, perhaps a breakout is on the cards in the near term. For now, AUD/USD continues to respect the June VPOC as resistance, and even if bulls break above it, they still have the monthly R1 pivot point and the June 15 high to contend with. A break above 0.7100 could provide the first real test of this risk-on rally.
For now, however, my bias remains for a swing high to form and for AUD/USD to snap its four-week winning streak. The RBA seems unlikely to hike again this cycle, while futures traders continue to increase their bearish bets against the Australian dollar, according to recent Commitment of Traders (COT) data.
Source: ICE, TradingView
AUD/JPY Bounce Faces Heavy Resistance After its worst five-day run in 15 months, AUD/JPY found support at its 200-day moving averages and formed a bullish engulfing day. Under normal circumstances, this could provide the foundation for a decent rebound, but traders are right to remain wary of betting against the Japanese yen too aggressively given the scale of currency intervention over the past week. I therefore suspect that, as with USD/JPY, bears may be looking to fade rallies around resistance levels.
Tuesday's high stalled around the July low, the 111.00 handle and the prior intervention level. The monthly pivot point also sits just beneath the 112.00 handle, while the July VPOC is near 112.50. Ultimately, bears have several notable resistance levels to monitor for evidence of a potential swing high.
Source: ICE, TradingView
AUD/NZD Bears Defend the 1.20 Handle The Aussie is in a clear downtrend against the Kiwi dollar on the daily chart, although it is trying to form a swing low. Monday's bearish outside candle met resistance at the 1.20 handle before closing beneath the March low, although Tuesday's bullish inside day suggests a tentative attempt to form a trough.
Today's New Zealand employment figures could determine whether hawkish RBNZ bets help push AUD/NZD towards the 200-day moving averages at 1.1556, or whether bulls have another crack at 1.20. But until we see a break or daily close above 1.20, risks remain skewed to the downside, with a break beneath the 200-day moving averages bringing 1.18 into focus.
The AUD/JPY cross trades in positive territory near 110.70, snapping the six-day losing streak, during the early European trading hours on Tuesday. However, the potential upside for the cross might be limited due to the coordinated intervention between the United States (US) and Japan, which could provide some support to the Japanese Yen (JPY) against the Australian Dollar (AUD).
"The view that FX intervention cannot have a lasting impact and merely alters short-term market flows seems right in many cases. However, depending on the circumstances and broader context, intervention can exert a significant influence on the market and trigger an inflection,” said Bank of America analyst Shusuke Yamada.
Japan and US step in to stabilise Yen after historic slideStrategists at BNY note that Japan’s finance ministry and the US Treasury have “intervened in the foreign exchange market to support the yen” after the currency weakened to its lowest level against the Dollar since 1986. Japanese Finance Minister Satsuki Katayama is cited as saying the joint action was aimed at “countering excessive volatility and disorderly movements in recent months,” underscoring that Tokyo “would not hesitate to carry out further joint intervention if needed.” BNY concludes that the authorities have made it clear they “remain ready to defend the currency” should renewed pressure on JPY emerge.
Technical Analysis:In the daily chart, AUD/JPY extends a corrective move below the 100-day simple moving average (SMA) and the Bollinger Bands 20-day middle band, which form a dense overhead supply zone. The pair is now drifting toward the lower Bollinger band support, while the Relative Strength Index (RSI) at 34.33 hovers just above oversold territory, hinting that bearish momentum remains in control but could be nearing exhaustion.
On the downside, immediate support is located at the lower Bollinger band near 110.40, where a pause or bounce could emerge if sellers take profits. The next contention level to watch is the 110.00 psychological level, followed by the August 3 low of 109.24.
On the topside, initial resistance is seen at the 100-day SMA at 112.85, followed by the Bollinger Bands middle band at 113.00; a daily close above these clustered barriers would be needed to ease the current bearish bias and open the way toward the upper Bollinger band near 115.62.
(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.
Why confirmed US-Japan intervention pushed Yen strength into the crosses instead of breaking USD/JPY below 155 What’s happening: Japan and the US jointly confirmed last week’s coordinated Yen-buying intervention, the first since 2011, and did so unusually fast, extending the Yen’s rally into Monday’s session. Yet USD/JPY stalled just above the key 155 support level as buyers emerged, and Yen strength instead squeezed into the crosses, hitting AUD/JPY, NZD/JPY, GBP/JPY, CAD/JPY and CHF/JPY hardest. Why it matters: The pattern suggests traders don’t yet believe intervention was designed to force USD/JPY meaningfully below 155, just to prevent a rapid return above 160. Whether that adjustment mechanism, squeezing carry trades in the crosses, continues, or USD/JPY eventually breaks 155 outright, is one of the more important themes to watch this week.
Also today:
Oil gapped lower again to as low as $81.55 as the US cancelled planned strikes and Trump signaled talks with Iran, though Tehran says no direct negotiations are planned yet. A week of top-tier US data begins today with ISM Manufacturing, building toward Friday’s non-farm payrolls, which will shape the Fed’s flexibility heading into next week’s CPI report rather than settle September policy on its own. Confirmed Intervention Marks a Break From Japan’s Usual Playbook The week’s opening session was dominated by an unusually explicit display of currency cooperation between Washington and Tokyo. Both governments confirmed they had jointly intervened to support the Yen last week, marking the first coordinated operation since 2011. More striking than the intervention itself was the speed of the confirmation. Rather than adhering to Japan’s long-standing strategy of refusing to comment on intervention, officials on both sides moved quickly to acknowledge the operation, reinforcing the message that they stand ready to act again if necessary. The shift suggests policymakers are placing greater value on intervention credibility than on strategic ambiguity.
USD/JPY Stalls at 155 as Yen Strength Squeezes Into the Crosses That message initially extended last week’s Yen rally, pushing USD/JPY lower in early trading. Yet the decline stalled just ahead of the key 155 support area, where buyers emerged before the pair could test the level decisively. The price action is notable because it suggests traders remain reluctant to challenge what has become an important technical level. For now, the market still appears to believe the objective of last week’s intervention was to prevent another rapid return above 160 rather than engineer a sustained move below 155.
Instead of forcing USD/JPY through support, demand for the Japanese currency found another outlet. Yen strength was effectively squeezed into the crosses, with high-yielding currencies bearing the brunt of the adjustment. AUD/JPY led losses, followed by NZD/JPY, while GBP/JPY, CAD/JPY and CHF/JPY also declined sharply. The pattern points to a broader reduction in Yen-funded carry trades rather than outright Dollar weakness. Whether this remains the preferred adjustment mechanism, or whether USD/JPY eventually breaks below 155, will be one of the more interesting themes to watch in the days ahead.
Crosses Under Pressure AUD/JPY: led losses among Yen crosses NZD/JPY: second-sharpest decline GBP/JPY, CAD/JPY, CHF/JPY: also declined sharply
Oil Gaps Lower Again as Diplomatic Signals Conflict Oil markets also began the week with another sharp gap lower. Brent crude, which closed above $90 last week, briefly fell to as low as $81.55 before stabilizing around the $83 area. As in recent weeks, the move reflected hopes of easing tensions in the Middle East after the US cancelled planned military strikes over the weekend. President Donald Trump said negotiations with Iran would begin on Monday, again raising expectations of a diplomatic breakthrough.
Tehran, however, continued to offer a far more cautious assessment. Iranian Foreign Ministry spokesperson Esmail Baghaei said there were no immediate plans for direct negotiations with Washington, reiterating that discussions remain limited to Omani mediation over the Strait of Hormuz. The conflicting narratives have become a familiar feature of this crisis. Markets appear reluctant to react aggressively to political statements alone, preferring to wait for tangible evidence of changes in shipping conditions or energy flows before reassessing geopolitical risk.
A Week Packed With Top-Tier US Data Attention now shifts firmly to a week packed with top-tier US economic data. ISM Manufacturing kicks things off today, followed by ISM Services, ADP employment and Friday’s non-farm payrolls. Fed funds futures continue to price a little over a 60% probability of a September rate hike, indicating markets still lean toward further tightening but without strong conviction.
That makes this week’s data particularly important, not because they are likely to determine September policy on their own, but because they will shape how much flexibility the Federal Reserve has heading into next week’s CPI report. A strong run of data would reinforce confidence in the economy and leave policymakers well positioned to tighten again should inflation remain sticky. Conversely, softer readings would raise the bar for another hike.
This Week’s US Data Calendar Today: ISM Manufacturing This week: ISM Services, ADP employment Friday: Non-farm payrolls Fed funds futures: a little over 60% probability of a September hike Currency Performance Today For the day so far, Yen is currently the strongest, followed by Euro, and then Dollar. Aussie is the worst, followed by Kiwi, and the Swiss Franc. Sterling and Loonie are positioning in the middle.
Related Coverage Yen & Precious Metals Deep Dives Read the deeper dive into why Japan and the US broke decades of strategic ambiguity to confirm intervention this fast, and what holding above 155 would signal: Why Did Japan and the US Confirm Intervention So Fast? Can USD/JPY Hold 155?. See why Gold has stopped reacting to oil, yields and the Dollar, and what could finally break its trading range: Why Gold Ignores Oil, Yields and Dollar, and What Could Finally Break the Range. Global Manufacturing PMI Roundup Read why the UK’s softer PMI headline masks the fastest factory output growth in almost two years: UK PMI Manufacturing at Four-Month Low, but Faster Output Growth Points to Resilient Recovery. See why Eurozone factory output hit a 52-month high, and why the recovery still isn’t being driven by fresh demand: Eurozone PMI Manufacturing at Three-Month High, but Recovery Still Lacks Fresh Demand. Read how AI and semiconductor demand are offsetting Middle East-related cost pressures in Japan’s factory sector: Japan PMI Manufacturing Finalized at 54.5, AI Demand Offsets Middle East Headwinds. See why Australia’s manufacturing rebound to a six-month high still comes with a fragility warning: Australia Manufacturing PMI Finalizes at Six-Month High, Yet Inflation and Supply Risks Limit Confidence. Read the three encouraging trends inside China’s slower manufacturing expansion: China’s Manufacturing Expansion Slowed, but Three Trends Offer Encouragement. Inflation Data See why Swiss inflation’s slip to 0.4% is concentrated in imported goods, not domestic price pressures: Swiss CPI Slips to 0.4% in July on Lower Fuel and Airfare Costs. Frequently Asked Questions Q: Why did USD/JPY stall at 155 instead of continuing lower after confirmed intervention? A: Buyers emerged just ahead of the 155 support area before the pair could test it decisively, suggesting traders remain reluctant to challenge what has become an important technical level. The market still appears to believe last week’s intervention was aimed at preventing a rapid return above 160, not at engineering a sustained move below 155.
Q: Why is Yen strength showing up in crosses like AUD/JPY instead of pushing USD/JPY lower? A: Instead of forcing USD/JPY through support, demand for the Japanese currency found another outlet in the crosses. AUD/JPY led losses, followed by NZD/JPY, GBP/JPY, CAD/JPY and CHF/JPY, a pattern that points to a broader reduction in Yen-funded carry trades rather than outright Dollar weakness.
Q: Why did Brent gap lower again despite Iran signaling no immediate direct talks with the US? A: The gap reflected hopes of easing tensions after the US cancelled planned military strikes over the weekend and President Trump said negotiations with Iran would begin Monday. Iran, however, offered a more cautious assessment, with its Foreign Ministry saying discussions remain limited to Omani mediation over the Strait of Hormuz. Markets have grown reluctant to react aggressively to political statements alone, preferring tangible evidence of changes in shipping conditions or energy flows.
Key Takeaways Confirmed intervention marks a real shift in strategy: Japan and the US jointly confirmed last week’s coordinated Yen-buying operation, the first since 2011, and did so far faster than Japan’s usual practice of strategic ambiguity. USD/JPY is defending 155, not breaking it: The pair stalled just ahead of the support zone as buyers emerged, suggesting markets see intervention’s goal as capping a return above 160, not forcing a sustained move below 155. Yen strength got squeezed into the crosses instead: AUD/JPY, NZD/JPY, GBP/JPY, CAD/JPY and CHF/JPY all fell sharply, pointing to a broader unwind of Yen-funded carry trades rather than Dollar weakness. Oil’s gap lower reflects hope, not confirmation: Brent fell as low as $81.55 on prospects of US-Iran talks, but Iran’s Foreign Ministry says no direct negotiations are planned yet, just Omani mediation, keeping the conflicting-narrative pattern intact. This week’s US data matters more for Fed flexibility than for a September verdict: ISM Manufacturing, ISM Services, ADP and Friday’s payrolls will shape how much room the Fed has heading into next week’s CPI report, with Fed funds futures currently pricing just over 60% odds of a September hike. What to Watch Next Whether USD/JPY eventually breaks below 155 or continues bleeding out through the Yen crosses is one of the week’s key technical questions. On the data side, today’s ISM Manufacturing kicks off a run of releases culminating in Friday’s non-farm payrolls, all of which will help determine how much flexibility the Fed has heading into next week’s CPI report.
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The AUD/JPY cross attracts heavy follow-through selling and touches its lowest level since late March, around the 109.40-109.35 region at the start of a new week. Spot prices, however, defend a technically significant 200-day Simple Moving Average (SMA) and trade around the 110.00 psychological mark during the first half of the European session, still down nearly 0.50% for the day.
The Japanese Yen (JPY) continues with its relative outperformance on the back of a joint US-Japan FX intervention on Friday and hints of further action. Furthermore, the Bank of Japan's (BoJ) readiness to continue pushing up borrowing costs lends additional support to the JPY, which, in turn, is seen as a key factor weighing on the AUD/JPY cross. Apart from this, diminishing odds of an immediate interest rate hike by the Reserve Bank of Australia (RBA) undermine the Australian Dollar (AUD) and suggest that the path of least resistance for the currency pair is to the downside.
From a technical perspective, an intraday failure near the 111.25-111.15 region reaffirms Friday's breakdown through a nearly four-month-old trading range and validates the near-term negative outlook for the AUD/JPY cross. Adding to this, the Moving Average Convergence Divergence (MACD) has turned deeper into negative ground, hinting at lingering downside momentum. However, the daily Relative Strength Index (14) has slipped to oversold territory near 27, making it prudent to wait for a break below the 200-day SMA at 109.25 before positioning for further losses.
A clear break below this floor would likely expose the AUD/JPY cross to a more decisive bearish phase. On the flip side, any attempted recovery might continue to face stiff resistance and remain capped near the 111.15-111.25 region, which, if cleared, might trigger a short-covering move. The broadly bearish technical setup, however, would warrant caution before confirming that the recent corrective decline from the vicinity of the 115.00 psychological mark has run its course and that spot prices have formed a near-term bottom.
AUD/JPY daily chart
Japanese Yen Price This week The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies this week. Japanese Yen was the strongest against the New Zealand Dollar.
USDEURGBPJPYCADAUDNZDCHFUSD0.21%0.27%-0.17%0.20%0.41%0.52%0.31%EUR-0.21%0.07%-0.33%0.00%0.30%0.32%0.10%GBP-0.27%-0.07%-0.74%-0.07%0.24%0.25%0.03%JPY0.17%0.33%0.74%0.43%0.71%0.79%0.57%CAD-0.20%-0.00%0.07%-0.43%0.29%0.36%0.10%AUD-0.41%-0.30%-0.24%-0.71%-0.29%0.00%-0.18%NZD-0.52%-0.32%-0.25%-0.79%-0.36%-0.00%-0.22%CHF-0.31%-0.10%-0.03%-0.57%-0.10%0.18%0.22% The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
(The technical analysis of this story was written with the help of an AI tool. Know more.)
The AUD/JPY cross trades in positive territory around 114.25 during the early European trading hours on Friday. The Australian Dollar (AUD) strengthens against the Japanese Yen (JPY) on a strong Australian employment report for June.
Australia’s Unemployment Rate stayed at 4.4% in June, according to the official data released by the Australian Bureau of Statistics (ABS) on Thursday. The figure came in line with the market consensus. Meanwhile, the Employment Change came in at 76.3K in June from a rise of 44K in May (revised from 40.3K), better than the forecast of a 15K increase.
Nonetheless, fears of currency intervention from Japanese authorities could lift the JPY and cap the upside for the cross. Japan’s Finance Minister Satsuki Katayama said on Friday that officials are ready to act appropriately on currency shifts whenever necessary. Katayama added that the authorities are prepared to take decisive steps on the foreign exchange.
Technical Analysis:In the daily chart, AUD/JPY retains a bullish bias as price holds firmly above the 100-day simple moving average (SMA) and the Bollinger Bands’ 20-day SMA, keeping the broader uptrend intact. The Relative Strength Index (RSI) at 63 suggests firm positive momentum, edging toward overbought territory and hinting that upside progress could slow as buyers confront nearby resistance.
On the topside, immediate resistance is aligned with the Bollinger upper band around 114.70. A decisive break above the latter would open the way to the June 2 high of 114.92.
On the downside, initial support is seen at the June 16 high of 113.55. The next contention level is located at the Bollinger middle band at 112.95, followed closely by the 100-day SMA at 112.85; a sustained move below these levels would signal a deeper correction toward the lower Bollinger band around 111.22.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Audjpy faces seasonal headwinds into late summerAccording to TD Securities, seasonal patterns argue for caution on AUD/JPY over the coming months. The bank highlights that the cross has "historically experienced bearish seasonality in July and August," noting that in particular, "the pair was down in August 71% of the time over the past 20 years for an average loss of -1.5%." TD Securities suggests this track record reinforces the case for a more defensive stance as the market moves deeper into the late-summer period.
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.
The AUD/JPY cross trades in positive territory around 113.85 during the early European session on Tuesday. The Australian Dollar (AUD) strengthens against the Japanese Yen (JPY) due to the interest rate differential between the Reserve Bank of Australia (RBA) and the Bank of Japan (BoJ). However, fears of possible intervention from Japanese authorities might cap the upside for the cross.
After delivering three consecutive 25 basis points (bps) hikes earlier this year, the Reserve Bank of Australia (RBA) decided to hold the Official Cash Rate (OCR) steady at 4.35% at its June policy meeting.
Economists warned that rising oil and fuel prices could cement a fourth interest rate rise this year if US President Donald Trump’s renewed conflict with Iran is not resolved within a week.
Traders have raised their bets on an RBA rate hike since airstrikes resumed last week, now pricing in nearly a 23% odds of a hike in August and more than a 50% chance by December, according to the Guardian.
In the daily chart, AUD/JPY holds a bullish near-term bias as it remains above the 100-day simple moving average (SMA) and the Bollinger Bands’ 20-day middle band, keeping the broader uptrend intact. Price is advancing toward the Bollinger upper band, while the Relative Strength Index (14) around 60 suggests firm but not overstretched upside momentum.
On the topside, immediate resistance aligns with the Bollinger Bands’ upper band at 114.10. The next hurdle is located at the May 13 high of 114.74, en route to the 115.00 psychological level.
On the downside, initial support is seen at the July 20 low of 113.10. The next contention level to watch is the 100-day SMA at 112.75, followed by the Bollinger middle band at 112.55, with a deeper cushion coming in at the lower band near 111.05 should a corrective pullback develop.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Australian Dollar FAQs One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
The AUD/JPY cross trades in negative territory around 113.35 during the early European trading hours on Friday. Fears of possible intervention from Japanese officials provide some support to the Japanese Yen (JPY) against the Australian Dollar (AUD).
Japan’s Finance Minister Satsuki Katayama delivered verbal intervention again on Friday, saying that "if it becomes necessary, we will take decisive action at any time.” This remark came ahead of a holiday weekend in Japan, a timing that in the past has been used for late-night interventions.
The Bank of Japan (BoJ) will meet later this month after hiking interest rates to the highest level in three decades in June. The Japanese central bank is anticipated to raise rates again before the end of the year, but it isn’t expected to move at the July policy meeting.
Technical Analysis:In the daily chart, AUD/JPY holds a constructive bullish bias as spot price advances above both the 100-day simple moving average (SMA) and the Bollinger Bands’ middle line, hinting at firm underlying demand. The Relative Strength Index (14) at 56.03 stays in positive territory without reaching overbought levels, suggesting that the latest upswing still has room to extend while prices remain supported above these key averages.
On the topside, immediate resistance is defined by the Bollinger upper band around 113.80, where fresh supply could slow the rally. The next hurdle to watch is the May 13 high of 114.74. On the downside, initial support is seen at the 100-day SMA at 112.70, followed by the Bollinger middle band at 112.45 and the lower band near 111.05, levels that together outline the main downside cushions in case of a corrective pullback.
(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.
The AUD/JPY cross trades in negative territory around 113.45 during the early European trading hours on Thursday. Verbal intervention from Japanese authorities provides some support to the Japanese Yen (JPY) against the Australian Dollar (AUD).
Japan’s Finance Minister Satsuki Katayama said on Thursday that the authorities are ready to take appropriate action on currency anytime as needed. She added that the officials will track market trends and economic data to ensure fiscal sustainability.
Senior officials from the Bank of Japan (BoJ) noted that a delay in stimulus adjustment amid high inflation risk could trigger an economic downturn. However, a Reuters survey showed earlier Thursday that nearly half of Japanese firms are experiencing negative business impact from the BoJ's interest rate hikes, with higher borrowing costs hurting bottom lines and discouraging capital investment.
Technical Analysis:In the daily chart, AUD/JPY holds a bullish near-term bias as price remains above the 100-day Simple Moving Average (SMA) and the Bollinger Bands 20-period middle band, suggesting the broader uptrend is still supported despite recent consolidation. The latest Relative Strength Index (14) reading around 57 keeps momentum on the constructive side, hinting that buyers retain control as long as the pair stays comfortably above the lower Bollinger band at 111.10.
On the topside, initial resistance emerges at the Bollinger upper band around 113.70, where a sustained break would open the door to the May 13 high of 114.74.
On the downside, the first layer of support is seen at the 100-day SMA at 112.65, followed by the Bollinger middle band near 112.40, while a deeper pullback towards the lower band at 111.10 would be needed to seriously challenge the prevailing bullish structure.
(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.
The AUD/JPY pair broke past the 113.00 resistance level following previous quiet six session bounds between 111.95 and 112.81 Yen weakness was fueled by interest rate differences and market confusion over speculation that Japan's massive pension fund might relocate foreign assets back home The Aussie dollar found solid fundamental support as global commodity prices remained firm despite the geopolitical tensions in the Middle East After six sessions trading within a tight range of 111.95 to 112.81, the AUD/JPY pair moved decisively higher on Tuesday. It surpassed the 113.00 psychological level and continued its ascent today, nearing 113.39. So, what changed?
Speculation Over the World’s Largest Pension Fund Triggers Yen Selloff Headlines regarding Japan’s Government Pension Investment Fund (GPIF) appear to be the primary driver behind the yen’s recent decline. Reports suggest the government is considering encouraging the massive pension fund to increase its investments in domestic assets to support local markets and the yen. While this sounds like it should strengthen the Japanese currency, the market reacted with immediate skepticism.
This skepticism stems from past attempts by the Japanese finance ministry to support the yen, which proved costly and ineffective. As CNBC reported, Tokyo’s finance ministry burned through roughly $73 billion defending the yen back in April and May, only to watch it slide right back toward the levels it started from.
Analysts suggest the yen’s weakness is rooted in structural issues. These include Japan’s growing public debt, a government focused on reflation, and inflation expectations that are not aligning with typical interest rate differentials.
On the Aussie side, the Reserve Bank of Australia has hiked its cash rate three times this year to 4.35%. Despite holding rates steady in June, RBA meeting minutes indicated ongoing concerns about inflation exceeding the target, with core inflation accelerating even as headline inflation eased.
A Finder survey of more than 40 economists shows 55% of them expect at least one more rate hike this year, likely in August. This policy stance supports Australian yields and the carry appeal of the Australian dollar.
Commodity prices and China’s economic performance also play a significant role. Australia, as a major exporter of iron ore, coal, and liquefied natural gas, benefits from resilient demand from China. Positive economic indicators from Beijing have bolstered risk sentiment and AUD strength.
Market Outlook Signals Bullish Bias with Caution This breakout suggests a constructive near-term outlook for AUD/JPY, potentially targeting higher levels if policy divergence persists and global risk conditions remain favorable.
For those considering trading this breakout, entering at current levels around 113.40 presents some short-term risk. A sustained move above 113.58 on a daily closing basis would be the next key level to watch, potentially opening the way toward 113.90 and the 52-week high zone around 114.90.
Below the surface, though, this rally is fragile. A significant risk to long positions is the potential for direct market intervention by the Bank of Japan or the Ministry of Finance to support the yen. Such action could lead to a rapid and substantial decline in the AUD/JPY pair.
Why did AUD/JPY break above 113.00 this week?
The breakout was caused by a combination of RBA rate-hike expectations supporting the Aussie and persistent yen weakness tied to Japan’s debt concerns and ineffective currency intervention.
Is the Australian dollar actually getting stronger?
The Australian dollar’s appreciation appears to be more a reflection of yen weakness than a substantial increase in the Australian dollar’s strength, although RBA policy has contributed positively.
How does China’s economy influence Australian dollar strength?
Stronger Chinese demand for commodities like iron ore and coal increases Australia’s export revenues, improving its terms of trade and supporting the AUD.
The AUD/JPY cross trades in positive territory around 113.25 during the early European trading hours on Wednesday. The Japanese Yen (JPY) edges lower against the Australian Dollar (AUD) after reports regarding the Government Pension Investment Fund (GPIF).
Finance Minister Satsuki Katayama said on Tuesday that the government is considering nudging the world's largest pension fund to buy domestic financial assets to support the currency, though concrete plans have yet to materialize. However, traders remain on alert for possible intervention from Japanese authorities, which might cap the upside for the cross.
Technical Analysis:In the daily chart, AUD/JPY holds a near-term bullish bias as price extends above the 100-day simple moving average (SMA) and the 20-day Bollinger middle band, keeping the broader uptrend supported. The Relative Strength Index (RSI) at 56.23 sits in positive territory without entering overbought conditions, suggesting that buying pressure remains constructive but not overstretched.
On the topside, the next notable resistance is the upper Bollinger band, emerging around 113.55, where the current advance could start to face profit-taking. The next hurdle to watch is the May 14 high of 114.66. On the downside, initial support is seen at the 100-day SMA at 112.65, followed by the Bollinger midline near 112.35, while deeper pullbacks would likely be cushioned by the lower Bollinger band around 111.15.
(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.
The AUD/JPY cross gathers strength to near 112.55 during the early European trading hours on Tuesday. The Japanese Yen (JPY) attracts some sellers against the Australian Dollar (AUD) after Reuters reported on Monday that Tokyo had no immediate plans to alter the asset allocation of its state pension funds, reducing expectations of near-term support for domestic assets.
Nonetheless, Japan’s Finance Minister Satsuki Katayama said the country’s massive pension fund would adjust its holdings if necessary, while also proposing the inclusion of government bonds in a tax-free investment program for individual investors.
Technical Analysis:In the daily chart, AUD/JPY retains a mildly bearish bias as it holds just beneath the 100-day simple moving average (SMA). Price remains above the Bollinger middle band, suggesting some near-term demand, but the proximity of the upper band and the capping 100-day SMA reinforces a topside-constrained tone. The Relative Strength Index (RSI) at 49.81 sits near neutral, hinting at consolidative momentum rather than a clear directional drive.
On the topside, immediate resistance is seen at the 100-day SMA at 112.60, with a break exposing the Bollinger upper band near 113.40 as the next barrier. On the downside, initial support aligns with the Bollinger middle band at 112.30, ahead of a deeper cushion at the lower band around 111.25, where stronger buyers could attempt to reassert control if the current drift extends.
(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.
Japanese yen volatility has returned as traders unwind record short positions ahead of US CPI. With USD/JPY testing major resistance below 163 and intervention risks lingering, futures positioning suggests gains may become harder to come by. Here are the key USD/JPY and AUD/JPY trade setups to watch.
View related analysis:
Yen Bears Capitulate, US Dollar Nearing Sentiment Extreme? | COT report Australian Dollar Outlook: AUD/USD Bounce Losing Steam Ahead of US CPI Gold Price Outlook: Bulls Weigh the Odds of Another Bounce Above $4,000 How to Read the COT Report to Track Forex Market Sentiment Japanese Yen Short Covering Puts USD/JPY at a Critical Juncture Japanese Yen Volatility Returns Ahead of US CPI Volatility has perked up for the Japanese yen over the past few weeks, and it has cut both ways. A market-led selloff heading into the 2 July non-farm payrolls (NFP) report saw USD/JPY fall by as much as 200 pips before recouping those losses over the following four days. On Friday, USD/JPY fell more than 100 pips on reports that Japan's largest pension fund had been instructed to purchase domestic assets.
This is quite a significant development because it suggests Japan is exploring alternative ways of supporting the yen besides traditional currency intervention. It could prove a shrewd approach, allowing policymakers to avoid swimming against the tide while the Federal Reserve maintains a hawkish stance and US economic data continues to outperform.
Source: ICE, TradingView
Yen Gains May Be Harder to Come By I think the bigger takeaway is that easy gains on USD/JPY may be harder to come by, but that is not the same as saying the pair cannot move higher. The combination of traders remaining wary of potential intervention, alongside efforts to support the yen without directly intervening, could allow USD/JPY to grind higher while keeping volatility elevated. Put another way, the broader uptrend may remain intact, but traders should expect more frequent bouts of two-way price action.
With USD/JPY testing resistance ahead of today's US inflation report, traders are on high alert for either a bullish breakout or a sharp reversal. Markets continue to price in a hawkish Fed, so it may not take much of a downside CPI surprise to shake the market from these elevated levels, particularly as Japanese yen bears continue to capitulate in the futures market.
Japanese Yen Futures Positioning: USD/JPY COT Report I have been warning for several weeks about the potential sentiment extreme in Japanese yen futures. Gross short positions had climbed to record highs among both asset managers and large speculators, while long positions also edged higher despite the yen's persistent downtrend (USD/JPY uptrend). That pushed net-short exposure close to two-year highs for both groups of traders.
However, the latest Commitment of Traders (COT) report showed a clear reduction in bearish positioning last week. Gross short exposure was cut by a combined 48.8k contracts across both trader groups, falling 11.6% among large speculators and 12.7% among asset managers. Long positions increased only marginally, making this a story of short covering rather than fresh bullish conviction.
The conditions are not yet in place for a sustained yen rally, but if bearish traders continue heading for the exit, gains on USD/JPY may become harder to come by than they have been over recent months.
Source: CFTC (COT), CME, LSEG
USD/JPY Technical Analysis: US Dollar vs Japanese Yen The 1-hour chart shows a decent uptrend from Monday's low. Prices are testing the weekly R1 pivot point while remaining above their daily, weekly and monthly VWAPs. We could see an early breakout attempt during today's session towards the cycle highs, although traders should note the July VPOC at 162.69, which aligns with last week's high and could provide resistance.
Bulls may also want to tread carefully around the cycle highs and take note of the pre-NFP price action, as it could trigger another pre-emptive pullback. Even so, several support levels are clustered around 162, including the 2024 high, the weekly pivot point and Monday's VPOC.
It could then come down to the US inflation report to determine whether we see a meaningful breakout or a deeper pullback. While a hot CPI report could tempt bulls to push above 163, I suspect the bigger move may come from a softer-than-expected print. That could see USD/JPY rotate lower within its recent choppy range between 160 and 162.50.
Ultimately, I suspect CPI will need to surprise decisively to the upside for any breakout above 163 to prove sustainable.
Source: ICE, TradingView
This content was created by an affiliate of FOREX.com and represents the views and opinions of the author/speakers, not the views and opinions of FOREX.com, StoneX Group Inc., or its subsidiaries. The content has not been independently reviewed by FOREX.com
AUD/JPY Technical Analysis: Australian Dollar vs Japanese Yen Compared with USD/JPY, volatility remains lower on AUD/JPY. Yet it has caught my attention because it presents several clusters of support and resistance that could provide attractive trading setups. It also partially removes some of the event risk associated with the US inflation report.
The daily chart shows prices oscillating between the 50-day and 100-day EMAs. Momentum has turned slightly lower from last week's high and monthly pivot point, while Monday's shooting star signals a failed attempt to retest Friday's doji high.
Even if prices spike above last week's high, the June VPOC sits at 113.09 and could provide resistance, followed by the May VPOC at 113.48. While 112 may offer initial support, a break below that level brings the 100-day EMA into focus, near the Ministry of Finance (MOF) intervention low.
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.
(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.
The AUD/JPY cross trades in negative territory around 112.62 during the early European trading hours on Thursday. The Japanese Yen (JPY) edges higher against the Australian Dollar (AUD) amid escalating tensions in the Middle East after US President Donald Trump said an interim agreement to end the war with Iran was “over.”
Traders are also on high alert for possible intervention from Japanese officials. “The yen’s current weakness is excessive and fails to reflect the strong fundamentals of the Japanese economy, a misalignment that could prompt major central banks to launch coordinated intervention,” said Michael Nizard, head of multi-asset and overlay at Edmond de Rothschild Asset Management.
Technical Analysis:In the daily chart, AUD/JPY holds above the 100-day moving average (MA) and the Bollinger Bands’ 20-day simple moving average (SMA), which together suggest a constructive bullish bias after the recent pullback. Price also remains comfortably above the lower Bollinger band, while the upper band marks the next upside objective as the pair grinds higher; the Relative Strength Index (14) near 50 keeps momentum neutral, hinting at consolidation rather than exhaustion for now.
On the downside, initial support is seen at the 100-day MA at 112.55, followed by the Bollinger midline around 112.42 and then the lower band at 111.15, where buyers would likely defend the broader uptrend. On the other hand, the first upside barrier emerges at the June 16 high of 113.55. The next hurdle is seen at the upper Bollinger band at 113.70, en route to the May 13 high of 114.74.
(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.
The AUD/JPY cross gathers strength to around 112.70 during the early European session on Wednesday. Nonetheless, renewed tensions between the US and Iran, and fears of possible intervention by Japanese authorities might support the Japanese Yen (JPY) and cap the upside for the cross.
BBC reported on Tuesday that the US launched "powerful" strikes on Iran in response to attacks on three oil tankers in the Strait of Hormuz. US Central Command (Centcom) said that it had hit over 80 targets, including more than 60 Islamic Revolutionary Guard Corps (IRGC) small boats in the strait.
In the daily chart, AUD/JPY holds above the 100-day moving average (MA) and the Bollinger Bands’ (20) middle band, keeping the broader trend supported after the latest rebound. Price is also comfortably above the lower Bollinger band, while the Relative Strength Index (14) around 51 suggests neutral-to-mildly positive momentum rather than an overstretched rally.
On the downside, the immediate technical floor aligns with the 100-day MA at 112.50 and the Bollinger middle band at 112.43, forming a nearby demand zone; a daily close below this area would expose the lower Bollinger band at 111.15. On the upside, the first upside barrier emerges at the June 16 high of 113.55, en route to the the Bollinger Bands’ upper band of 113.70.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Australian Dollar FAQs One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
