AUD/JPY Price Forecast: Strengthens above 110.00, but remains bearish below 100-day SMA

AUD/JPY gathers strength to near 110.30 in Friday’s early Asian session.
Market views that the BoJ would take a cautious stance on a rate hike at its October monetary policy meeting.
The negative outlook of the cross remains intact below the 100-day, with bearish RSI momentum.
The first upside barrier is seen at 110.55; the first downside target to watch is 110.00.

The AUD/JPY cross trades in positive territory around 110.30, snapping the two-day losing streak during the early European trading hours. Cautious rhetoric from Japanese policymakers weighs on the Japanese Yen (JPY) against the Australian Dollar (AUD).

Análisis de TMGM: noticias de mercados financieros, calendario económico e información del mercado

Earlier this week, Bank of Japan (BoJ) Governor Kazuo Ueda delivered comments that were less hawkish than markets had expected, saying that the central bank would "assess the likelihood and risks of the baseline economic and price outlook being realized" when considering the pace and timing of future rate increases.

Meanwhile, BoJ Ayano Sato stated on Wednesday that she supported a gradual approach to raising interest rates in multiple stages.

Traders are now pricing in nearly a 12% chance of a rate hike this month, down from as high as 40% early last week, according to Bloomberg. The current chance rises to around 90% when the December meeting is included.

BoJ’s gradual tightening chips away at yen’s carry trade appeal

Rabobank’s FX strategists note that, “despite announcing an as expected rate hike at its September policy meeting, the BoJ’s guidance was not as hawkish as the market had hoped for.” Even so, they stress that “the BoJ’s policy of gradually raising interest rates is still eroding the JPY’s funding currency appeal,” as the steady tightening cycle undermines the Yen’s traditional role in carry trades.

BoJ’s Sato backs gradual tightening, keeps Yen outlook cautiously hawkish

BoJ’s Sato speech scores 6.4 on FXS Speechtracker, exactly in line with the speaker’s historic average, signaling a stable but mildly hawkish stance. Agreement on gradual interest rate adjustment and rejection of a preset hiking path point to a cautious normalization bias that can lend modest support to the Yen.

The emphasis on policy independence alongside the administration’s proactive fiscal stance suggests scope for further rate moves if inflation risks materialize. With price risks seen tilting slightly higher on rising oil costs linked to Middle East tensions, the speech reinforces a hawkish tilt at the margin, keeping upside risks for the Yen intact while avoiding an aggressive tightening signal.

Technical Analysis: AUD/JPY keeps a bearish vibe under the 100-day SMA

In the daily chart, AUD/JPY retains a bearish near-term bias as spot holds beneath the 100-day simple moving average (SMA) and the Bollinger Bands’ 20-day middle SMA. Price also sits below the upper Bollinger band, while the Relative Strength Index (14) around 43 points to waning bullish momentum and keeps the focus on downside risk rather than a sustained recovery.

On the topside, initial resistance is offered by the Bollinger middle band at 110.55, en route to the upper boundary of Bollinger Band at 112.10 and then the 100-day SMA at 112.45. A desicive break above this level could pave the way to the July 27 high of 114.67.

On the downside, the next notable support level emerges at the 110.00 psychological level. Any follow-through selling below the mentioned level could see a drop to the lower limit of Bollinger Band at 109.00, followed by the October 1 low of 108.71.

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

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.

Siguiente artículo