AUD/JPY Price Forecast: Weakens below 113.50 on safe-haven demand, but maintains bullish outlook

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The AUD/JPY cross attracts some sellers to near 113.40 during the early European session on Thursday. Escalating tensions in the Middle East continue to boost the safe-haven currencies such as the Japanese Yen (JPY) against the Australian Dollar (AUD).

AUD/JPY weakens to around 113.40 in Thursday’s early European session.
The cross keeps the bullish vibe, but further consolidation cannot be ruled out with overbought RSI momentum.
The first upside barrier emerges at 113.70; the initial support level to watch is 110.40.

Bloomberg reported on Thursday that Oman has evacuated all vessels from its key oil export terminal at Mina Al Fahal as a precautionary measure. The evacuation order came after drones struck fuel tanks at Oman’s Salalah Port on Wednesday, while others were intercepted. Meanwhile, Iran has launched its “most intense operation since the beginning of the war. Tehran stepped up its efforts to halt traffic through the Strait of Hormuz, the critical oil conduit. Signs of a prolonged conflict in the Middle East could weigh on the riskier assets, such as the Aussie.

On the other hand, the hawkish expectation from the Reserve Bank of Australia (RBA) might help limit the AUD’s losses. Traders raise their bets that the RBA will raise interest rates next week as the conflict in the Middle East drags on, triggering a spike in the oil price and leaving the central bank more worried about inflation.

Technical Analysis:

In the daily chart, the near-term bias of AUD/JPY is bullish as price holds near recent highs after an extended advance from the 107.00 area. The cross stays well above the rising 100-day EMA around 106.00, which underpins the broader uptrend. The latest Bollinger structure shows price pushing above the upper band near 113.65, signaling strong upside momentum but also stretched conditions after the recent breakout above the mid-band cluster around 110.40. RSI around 70 confirms firm bullish momentum, though it also warns that upside could slow as the pair enters overbought territory.

Initial resistance is aligned with the recent peak and upper Bollinger Band at 113.70, with a sustained break opening the way toward the 115.00 region. On the downside, first support emerges at the prior consolidation and mid-Bollinger area near 110.40, followed by stronger support around 108.50 where the Bollinger mid-line and recent swing lows converge. A daily close below 108.50 would weaken the bullish structure and expose the 100-day EMA zone near 106.00 as the next downside objective.

(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.