AUD/JPY Price Forecast: Declines on softer Australia's CPI, but broader bullish trend remains intact

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The AUD/JPY cross attracts some sellers to around 113.95 during the early European trading hours on Wednesday. The Australian Dollar (AUD) softens against the Japanese Yen (JPY) as Australian Consumer Prices Index (CPI) inflation rose by less than expected in April.

AUD/JPY weakens to near 113.95 in Wednesday’s early European session.
The positive outlook of the cross remains intact above the 100-day EMA, with bullish RSI momentum.
The immediate resistance level emerges at 114.60; the initial support level to watch is 113.60.

Data released by the Australian Bureau of Statistics (ABS) on Wednesday revealed that the country’s CPI rose by 4.2% YoY in April, compared to a 4.6% increase reported in March. This figure came in cooler than the market expectation of 4.4% growth. Meanwhile, the monthly CPI came in at 0.4% in April, versus 1.1% prior.

Financial markets have dialed back rate hike expectations, pricing in a 93% probability that the Reserve Bank of Australia (RBA) will hold the Official Cash Rate (OCR) steady at its June policy meeting, according to the ASX RBA Rate Tracker.

Technical Analysis:

In the daily chart, AUD/JPY maintains a constructive bullish bias as the spot holds above both the 100-day simple moving average (SMA) and the Bollinger middle band. The pair is pressing into the upper half of its recent volatility envelope, while the Relative Strength Index (14) around 54 suggests positive yet not overstretched momentum, hinting that buyers still retain control unless price slips decisively back through the mid-band.

On the topside, immediate resistance is aligned with the Bollinger upper band at 114.60, where a clear daily close higher would open the way to further gains. On the downside, initial support is seen at the Bollinger middle band around 113.60, ahead of the May 22 low of 113.27. A deeper setback would expose the more substantial dynamic floor at the lower band near 112.58. The next contention is seen at the 100-day SMA at 110.97, where broader bullish structure would likely be reassessed.

(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.

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