AUD/JPY Price Forecast: Keeps bullish vibe near 108.50 amid Japan's fiscal and political challenges
- AUD/JPY gathers strength to around 108.50 in Thursday’s early European session.
- The positive outlook for the cross remains intact as the price holds above the 100-day EMA, with bullish RSI momentum.
- The initial support level is located at 106.35.
The AUD/JPY cross extends the rally to near 108.50 during the early European session on Thursday. Concerns over fiscal health and political uncertainty in Japan weigh on the Japanese Yen (JPY) against the Australian Dollar (AUD). Japan's Prime Minister Sanae Takaichi unveiled plans to pause the country’s consumption tax if her Liberal Democratic Party wins the February 8 election.
Meanwhile, speculation about a possible intervention by Japanese authorities might help limit the JPY’s losses. Takaichi warned over the weekend that officials stand ready to take necessary steps against speculative and highly abnormal market moves.
Technical Analysis:
In the daily chart, AUD/JPY holds above the 100-day EMA, keeping the broader uptrend intact. Price sits marginally above the upper Bollinger Band at 108.39, indicating a stretched advance as the bands widen. RSI at 68.31 is close to the overbought threshold and confirms firm bullish momentum. A daily close above the band could extend the move, while rejection would open a corrective slide toward the middle band.
Bollinger Bands remain in expansion, keeping volatility elevated as the trend extends. The 100-day EMA at 102.46 remains a deeper trend floor. RSI below 70 leaves limited room before overbought conditions; a downtick from here would flag consolidation rather than a reversal. The initial support is seen at the middle band of 106.35, followed by the lower Bollinger Band at 104.35. Staying above the rising middle band would keep the bullish bias intact.
(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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