AUD/JPY Price Forecast: Holds losses to near 104.00, RBA rate decision looms
- AUD/JPY weakens to around 104.05 in Monday’s early European session.
- The RBA interest rate decision will take center stage on Tuesday.
- The cross keeps positive outlook in the medium term, but further downside cannot be ruled out in the near term amid bearish RSI.
- The first upside barrier emerges at 106.48; the initial support level is located at 102.95.
The AUD/JPY cross attracts some sellers near 104.05 during the early European session on Monday. The Japanese Yen (JPY) strengthens against the Australian Dollar (AUD) as the Bank of Japan (BoJ) Summary of Opinions from the January 22-23 meeting revealed growing hawkishness. Board members warned against falling "behind the curve" on inflation and called for timely rate hikes.
All eyes will be on the Reserve Bank of Australia (RBA) interest rate decision on Tuesday. The RBA is likely to raise the Official Cash Rate (OCR) by 25 basis points (bps) to 3.85% at its February meeting. This expectation hike follows a rise in inflation, which saw the Consumer Price Index (CPI) climb to 3.8% in December. If the Australian central bank delivers a hawkish tone or signals multiple hikes, this could boost the Aussie against the JPY in the near term.
Technical Analysis:
In the daily chart, AUD/JPY holds above a rising 100-day EMA, maintaining the medium-term uptrend. A pullback toward this average would test trend support. Spot trades below the lower Bollinger Band at 104.37 as the bands widen, signaling elevated volatility and a stretched downside. RSI at 41.21 sits below the 50 mark, confirming weakening momentum. Recovery could extend toward the middle band at 106.48, while continued pressure risks a retest of the 100-day EMA at 102.95.
Despite the broader bias remaining supported by the 100-day EMA, near-term traction has turned bearish after the break beneath the lower band. Any base above this average would improve the tone. The widening Bollinger Bands point to expanding volatility and could precede a directional move. RSI below 50 suggests rebounds could fade until momentum turns higher.
(The technical analysis of this story was written with the help of an AI tool.)
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.
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