AUD/JPY Price Forecast: Softens near 104.00 amid intervention fears, broader uptrend prevails

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The AUD/JPY cross attracts some sellers near 104.05 during the early European session on Tuesday. The Japanese Yen (JPY) strengthens against the Australian Dollar (AUD) amid the intervention fears.

AUD/JPY softens to around 104.05 in Tuesday’s early European session.
The cross keeps the upward bias above the key 100-day EMA, with the bullish RSI momentum.
The immediate resistance level to watch is 104.74; the first support level is seen at 102.82.

The AUD/JPY cross attracts some sellers near 104.05 during the early European session on Tuesday. The Japanese Yen (JPY) strengthens against the Australian Dollar (AUD) amid the intervention fears. Japan’s Finance Minister Satsuki Katayama said on Tuesday that the official has a free hand in dealing with excessive moves in the Japanese Yen (JPY).

Earlier on Monday, Japan’s top foreign exchange (FX) official, Atsushi Mimura, stated that recent foreign exchange moves were one-sided and sharp. Mimura added that he is concerned about the FX move and the government will take appropriate action against excessive actions.

Nonetheless, a hawkish hold narrative from the Reserve Bank of Australia (RBA) might help limit the Aussie’s losses. The RBA minutes from its December meeting indicated a growing concern that inflation may be more persistent than previously expected, leading the board to discuss the potential need for an interest rate hike next year.

Technical Analysis:

In the daily chart, AUD/JPY trades at 104.06. Price remains well above the rising 100-day EMA at 99.64, reinforcing the broader uptrend. The average has been grinding higher for weeks, keeping the bullish bias intact. RSI at 63.03 holds above the neutral 50 mark, with momentum cooled from earlier overbought readings yet still supportive. Price stands above the Bollinger middle band at 103.09 and leans toward the upper band at 104.74 as the bands contract, signaling reduced volatility. A decisive close through the upper band could pave the way to the 105.00 psychological level.

The December 19 low of 102.82 acts as an initial contention level for the cross. Bollinger Bands continue to narrow, with the lower band rising to 101.44 and providing dynamic support as the trend matures. A rejection from the upper band would keep AUD/JPY consolidating back toward 101.44, while sustained strength above the band would extend the advance in line with the prevailing uptrend.

(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.