AUD/JPY Price Forecast: Holds steady near 110.00, bearish technicals persist
- AUD/JPY flatlines around 110.10 in Monday’s early European session.
- BoJ is expected to raise its policy interest rate to 1.25% at its September meeting on Friday.
- Negative outlook for the cross prevails below the 100-day SMA; a temporary recovery cannot be ruled out amid oversold RSI.
- The first downside target to watch is 109.70; the immediate resistance level is located at 111.63.
The AUD/JPY cross trades on a flat note near 110.10 during the early European trading hours on Monday. The Japanese Yen (JPY) gains ground against the Australian Dollar (AUD) amid growing expectations that the Bank of Japan (BoJ) will raise its policy interest rate to 1.25% on Thursday, the highest level in about 31 years.
With underlying inflation approaching the BoJ’s 2% target, the Japanese central bank is set to hike its policy rate at the September policy meeting to respond to upside risks to prices. The last time the BoJ policy interest rate stood at 1.25% was in April 1995.
"A 25 bps hike is already almost fully priced," said MUFG analysts. ”For the yen to strengthen further, the BOJ will have to signal that they are planning to stick to the faster pace of hikes,” they added.
Traders will closely monitor any hints from BoJ Governor Kazuo Ueda’s press conference briefing on the pace of future rate hikes and how far the central bank could take rates under the current tightening cycle.
On the Aussie front, markets are now pricing in nearly a 76% chance that the Reserve Bank of Australia (RBA) will raise the Official Cash Rate (OCR) to 4.60% at the next RBA Board meeting, according to RBA Rate Tracker.
Yen steadies as Japan pushes back on US policy pressure
Analysts at Scotiabank highlight that Japanese officials at the Ministry of Finance have firmly resisted recent US attempts to steer Japan’s macro policy stance, noting that Finance Minister Katayama went so far as to describe Treasury Secretary Bessents’ remarks as “a bit scary.” This pushback, Scotiabank suggests, underscores the authorities’ determination to retain policy autonomy even as external criticism intensifies.
Technical Analysis: AUD/JPY remains capped under the 100-day SMA amid oversold RSI
In the daily chart, AUD/JPY remains under clear bearish pressure as price holds well below the 20-period Bollinger middle band and the 100-day moving average (MA), keeping the broader trend capped. The Relative Strength Index (14) has slipped to around 29, edging into oversold territory, which hints that while downside bias dominates, selling momentum may be stretched in the near term.
On the downside, immediate support is situated near the 20-period Bollinger lower band at 109.70, where bears could pause or book profits. Further south, the next contention level is seen at the August 3 low of 109.24, followed by the March 31 low of 108.79.
On the topside, initial resistance comes at the August 10 low of 111.63, en route to the Bollinger middle band at 112.80, followed by the 100-day MA at 113.00. A decisive break above this level could pave the way to the Bollinger upper band around 115.90.
(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.
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