AUD/JPY Price Forecast: Bearish bias holds below the 100-day SMA as pair slips under 109.50

Selling pressure keeps AUD/JPY near 109.30 as Thursday’s European session gets under way.
Readiness to intervene again in support of the Japanese Yen was signalled by Japanese officials.
With RSI momentum bearish and the cross below the 100-day SMA, the outlook continues to favour the downside.
While 108.65 provides the first support, the immediate upside hurdle stands at 110.25.

Intervention concerns keep traders on high alert as AUD/JPY trades lower near 109.30 in Thursday’s early European session. Market participants remain watchful for action by Japanese authorities to bolster the Japanese Yen (JPY).

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Describing recent currency movements as excessively rapid, Japan’s top currency diplomat Atsushi Mimura spoke on Thursday without commenting on particular exchange-rate levels. Mimura said, “It’s too early to forget what happened this summer,” while declining to discuss specific levels.

A potentially limiting factor for JPY gains came from Bank of Japan (BoJ) board member Toichiro Asada, who said the central bank must consider the expected economic impact of earlier rate increases. He also noted that underlying inflation is fluctuating around levels consistent with the BoJ’s price target. His dovish remarks could restrict the Yen’s upside, thereby offering support to the cross.

Can Rising Japanese Household Demand for JGBs and BoJ Credibility Support Medium-Term Yen Gains?

Official figures now substantiate a significant change in domestic demand for Japanese government bonds, according to analysts at MUFG. Citing the source, they note that “the data confirming this pick-up in JGB buying by Japanese households comes from the MoF,” which “has an entire portion of its website dedicated to JGBs for individuals,” where issuance figures “show a marked pick-up in issuance to individuals with the November total for 3, 5 and 10-year totalling JPY 2,026bn, the largest single-month total.”

Speculation over policy changes is reinforcing the developing trend, MUFG says, pointing to “growing speculation that the government will soon make changes to incentivise JGB buying by including individual JGB holdings in tax-free NISA accounts and/or removing these holdings from inheritance tax.” Calling these developments “early signs of a shift in flows perhaps,” the analysts argue that “the more examples of this we start to see the more compelling the case will become of a more sustained turnaround in the multi-year trend of yen weakness.” Against a backdrop of “intervention likely halting the prospects to the upside, and confidence in the BoJ improving,” MUFG’s conclusion is that “the risks certainly look more skewed to yen strength over the medium term.”

Why Is BoJ’s Asada Cautious on Aggressive Tightening Despite Flagging Neutral Rates?

A mildly dovish bias for the Yen emerges from Asada’s focus on accommodative financial conditions and neutral policy rates, alongside warnings that additional hikes could hurt the economy and weaken core inflation. This comes despite his recognition that underlying inflation is near target. His BoJ speech registers 3.2/10 on FXS Speechtracker, matching his historical average exactly and indicating no material change in tone.

With growth and consumption subdued, Asada argues that demand is not clearly driving the current rise in prices and that any further rate increases need to be gradual and cautious. He favours assessing overshoot risks using actual consumer inflation figures. Together with concerns that earlier and future hikes could restrain inflation by slowing growth, this points to a preference for gradual normalisation, limiting near-term upside for the Yen.

Technical Analysis: Can AUD/JPY Shake Off Its Bearish Bias Below the 100-Day SMA?

Trading below both the 100-day simple moving average (SMA) and the Bollinger middle band, AUD/JPY retains a bearish short-term outlook on the daily chart. Its considerable distance below the Bollinger upper band also highlights the restraining influence of medium-term trend resistance. At 42.97, the Relative Strength Index (RSI) remains neutral to soft, suggesting modest downward momentum rather than outright exhaustion.

A sustained move above the first resistance at the Bollinger middle band, near 110.25, could open the way towards the important 110.70-110.75 resistance zone. That area corresponds to the 100-day SMA and the Bollinger upper band. Beyond it, attention would turn to 113.61, the high recorded on 18 August.

Should the decline continue, sellers may become more cautious around 108.65, where the Bollinger lower band offers the next significant support. Further down, the 6 November low of 108.24 provides the next level of support, ahead of the 13 February low at 107.70.

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

Japanese Yen: Frequently Asked Questions

Which factors matter most for the Japanese Yen?

Among the world’s most actively traded currencies, the Japanese Yen (JPY) broadly reflects the performance of Japan’s economy. More specific influences include Bank of Japan policy, the gap between Japanese and US bond yields, and traders’ appetite for risk, alongside other factors.

Why are Bank of Japan decisions important for the Japanese Yen?

Currency control forms part of the Bank of Japan’s mandate, making its actions particularly significant for the Yen. Direct intervention in currency markets has occasionally been undertaken by the BoJ, usually to weaken the Yen, though political concerns among Japan’s main trading partners discourage frequent action. Between 2013 and 2024, the BoJ’s ultra-loose monetary policy weakened the Yen against its major peers as the policy gap between the Bank of Japan and other leading central banks widened. A gradual unwinding of that ultra-loose stance has more recently offered the Yen some support.

Why does the Japanese-US bond yield gap matter for the Japanese Yen?

The Yen’s weakness against the US Dollar was supported by a widening gap between 10-year US and Japanese bond yields over the past decade. Behind that gap was the BoJ’s commitment to ultra-loose monetary policy, which increasingly diverged from the approach of other central banks, especially the US Federal Reserve. The differential is now narrowing as the BoJ’s 2024 decision to gradually exit ultra-loose policy coincides with interest-rate cuts by other major central banks.

Why does the Japanese Yen respond to changes in risk appetite?

During periods of market stress, investors tend to favour the Japanese Yen because it is widely regarded as a safe-haven investment with perceived reliability and stability. Consequently, market turbulence is likely to lift the Yen against currencies considered riskier investments.