AUD/JPY Price Forecast: Softens below 114.50 on weaker Australian GDP, but bullish trend prevails

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The AUD/JPY cross loses momentum to around 114.45 during the early European trading hours on Wednesday. Verbal intervention from Japanese authorities provides some support to the Japanese Yen (JPY) and acts as a headwind for the cross.

AUD/JPY attracts some sellers to near 114.45 in Wednesday’s early European session.
Australia's economy lost momentum in Q1.
The constructive outlook of the cross prevails above the 100-day EMA, with bullish RSI momentum.
The immediate resistance level emerges at 114.85; the initial support level to watch is 113.95.

Japan’s Finance Minister Satsuki Katayama said on Wednesday that officials are standing ready to respond appropriately on foreign exchange if required. Katayama added that she aligns with the Bank of Japan (BoJ) governor on several matters.

Furthermore, a weaker-than-expected Australian Gross Domestic Product (GDP) report might lead markets to expect a more dovish stance from the Reserve Bank of Australia (RBA) and contribute to the Aussie’s downside.

Australia's GDP grew 2.5% in the first three months this year, compared to 2.6% expansion a year earlier, and missed the market expectation of 2.7% growth, the Australian Bureau of Statistics showed Wednesday. On a quarter-on-quarter basis, Australia's GDP expanded 0.3%, compared with 0.5% forecast, and decelerated from 0.8% growth in the prior quarter.

Technical Analysis:

In the daily chart, AUD/JPY keeps a constructive bullish bias as it holds above the Bollinger middle band and comfortably over the 100-day moving average. The pair is edging toward the upper Bollinger band resistance, while the Relative Strength Index near 57 stays in positive territory without yet signaling overbought conditions, suggesting buyers retain control but with room for consolidation.

On the topside, immediate resistance emerges at the upper Bollinger band around 114.85, and a clear break above this cap would open the way for further gains in the near term. On the downside, initial support is seen at the Bollinger middle band near 113.95, ahead of secondary protection at the lower band around 113.00, with the 100-day moving average at 111.40 reinforcing a broader demand zone on deeper pullbacks.

(The technical analysis of this story was written with the help of an AI tool.)

Japanese Yen FAQs

What key factors drive the Japanese Yen?

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.

How do the decisions of the Bank of Japan impact the Japanese Yen?

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.

How does the differential between Japanese and US bond yields impact the Japanese 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.

How does broader risk sentiment impact the Japanese Yen?

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.