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
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.
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
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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.
