AUD/JPY Price Forecast: Extends decline below 109.00, bearish bias remains intact under 100-day SMA
- AUD/JPY tumbles to near 108.90 in Friday’s early European session.
- Negative tone of the cross prevails under the 100-day SMA, with bearish RSI momentum.
- The first upside barrier emerges at 109.15; the initial support level is seen at 108.64.
The AUD/JPY cross trades in negative territory around 108.90 during the early European trading hours on Friday. The Japanese Yen (JPY) strengthens against the Australian Dollar (AUD) on safe-haven flows and Bank of Japan (BoJ) rate hike signals.
Fears of tighter scrutiny of the Artificial Intelligence (AI) industry, particularly around data center construction, have unsettled global financial markets this week. The flight to safety boosts the JPY and puts downward pressure on the cross.
Hawkish BoJ Minutes might contribute to the JPY’s upside. According to the minutes of the September meeting released on Thursday, most of BoJ policymakers agreed that further interest rate increases would be appropriate as underlying inflation approached the central bank's 2% target.
One board member indicated that there may be room to accelerate interest rate increases as the central bank assessed the effects of Middle East developments, growing demand linked to Artificial Intelligence (AI), and Foreign Exchange (FX) movements.
BoJ minutes bolster case for gradual tightening path
Analysts at Deutsche Bank note that, in central bank news, the minutes from the BoJ's September meeting "reinforced the case for further policy tightening." They highlight that policymakers "generally agreed that interest rates should continue to rise," with one member "highlighting the possibility of a faster pace of hikes." At the same time, Deutsche Bank points out that another policymaker "noted that while there was no need for immediate action, the BoJ should continue to calibrate policy carefully to prevent excessive and persistent inflationary pressures," underscoring a cautious but clearly tightening bias within the committee.
Technical Analysis: Negative outlook of AUD/JPY remains intact below the 100-day SMA
In the daily chart, AUD/JPY keeps a bearish near-term tone as spot remains decisively capped beneath the 20-day simple moving average (SMA) component of the Bollinger Bands and the 100-day SMA. Price is pressing the lower end of the recent range with the Bollinger lower band acting as immediate overhead supply, while the Relative Strength Index (RSI) at 36.91 hovers just above oversold territory, hinting at persistent downside pressure rather than an imminent bullish reversal.
On the topside, initial resistance level is seen at the lower limit of Bollinger band at 109.15, en route to the 110.00 psychological level and 20-day SMA near 110.40, where stronger selling interest could emerge. Sustained trading above this level could pave the way to the upper boundary of Bollinger band at 111.65 and the 100-day SMA at 111.80.
On the downside, the October 15 low of 108.64 acts as an intial support level for the cross. A drop below the mentioned level would reopen the path toward the February 13 low of 107.70, followed by the January 26 low of 106.08.
(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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