Below 109.50: AUD/JPY Price Forecast remains bearish beneath the 100-day SMA as pair weakens

109.30 is in view as AUD/JPY eases in early European trading on Thursday.
Further intervention to support the Japanese Yen remains an option, Japanese officials indicated.
Below the 100-day SMA, the cross retains a bearish outlook, reinforced by negative RSI momentum.
110.25 marks the first resistance level, while initial support stands at 108.65.

109.30 is the approximate level for AUD/JPY as it trades lower. During Thursday’s early European session, traders remain highly alert to possible intervention by Japanese authorities to support the Japanese Yen (JPY).

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

Recent currency movements have been excessively fast, Japan’s top currency diplomat Atsushi Mimura said on Thursday. Declining to discuss specific exchange-rate levels, Mimura said: “It’s too early to forget what happened this summer,”

Separately, Bank of Japan (BoJ) board member Toichiro Asada urged the central bank to consider the expected economic impact of previous rate increases. Underlying inflation, he added, is fluctuating around levels compatible with the BoJ's price target. His dovish remarks could restrict JPY gains and lend support to the cross.

Japanese household JGB demand rises; BoJ credibility supports medium-term Yen gains

Official figures now substantiate a significant change in domestic demand for Japanese government bonds, according to MUFG analysts. As they explain, “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,” with issuance figures that “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 this developing trend, MUFG says, citing “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.” The analysts characterise this as “early signs of a shift in flows perhaps,” and contend 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,” their conclusion is that “the risks certainly look more skewed to yen strength over the medium term.”

BoJ’s Asada highlights neutral rates, cautions against rapid tightening

A 3.2/10 FXS Speechtracker score places BoJ’s Asada speech exactly at his historical average, indicating no material change in tone. Although he acknowledges that underlying inflation is around target, his focus on accommodative financial conditions and neutral policy rates suggests a mildly dovish bias for the Yen. That assessment also reflects his warning that additional rate increases could damage the economy and weaken core inflation.

With growth and consumption weak, Asada sees no clear evidence that demand is driving current price rises. He argues for caution and gradual steps in any further rate increases. His emphasis on actual consumer inflation figures when assessing overshoot risks, together with concerns that previous and future increases could slow growth and restrain inflation, favours a measured normalisation path. This limits the Yen’s near-term upside.

Technical Analysis: 100-day SMA Caps AUD/JPY as Bearish Bias Persists

Trading below both the 100-day simple moving average (SMA) and the Bollinger middle band leaves AUD/JPY with a bearish near-term outlook on the daily chart. The substantial gap below the Bollinger upper band also highlights the constraint from medium-term trend resistance. At 42.97, the Relative Strength Index (RSI) sits in neutral-to-weak territory, suggesting modest downward momentum rather than outright exhaustion.

The Bollinger middle band, near 110.25, provides the first resistance on a recovery. A clear break above it could open the way towards the important 110.70-110.75 resistance zone, where the 100-day SMA and the Bollinger upper band lie. Beyond that, attention turns to the 18 August high of 113.61.

If losses deepen, the lower Bollinger band around 108.65 is the next significant support, where sellers may become more cautious. Further support lies at 108.24, the 6 November low, ahead of the 13 February low of 107.70.

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

Japanese Yen: Key Questions

The Japanese Yen’s main drivers

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

Bank of Japan policy and its effect on the Yen

Currency control falls within the Bank of Japan’s mandates, making its decisions important for the Yen. Direct intervention in currency markets has occasionally been used, usually to weaken the currency. Political concerns among Japan’s principal trading partners, however, discourage frequent intervention. Between 2013 and 2024, the BoJ’s ultra-loose monetary policy widened the divergence with other major central banks, driving Yen depreciation against its main peers. The more recent gradual withdrawal of that policy has provided the Yen with some support.

Japanese and US bond yield gaps: implications for the Yen

Over the past decade, the BoJ’s commitment to ultra-loose monetary policy increased its policy divergence from other central banks, notably the US Federal Reserve. The resulting widening gap between 10-year US and Japanese bond yields supported the US Dollar against the Japanese Yen. That gap is now narrowing as the BoJ gradually withdraws ultra-loose policy following its 2024 decision, while other major central banks cut interest rates.

Risk sentiment and demand for the Japanese Yen

Often regarded as a safe-haven investment, the Japanese Yen tends to attract funds during periods of market stress because of its perceived stability and reliability. In turbulent conditions, this can strengthen the Yen against currencies considered riskier investments.