AUD/JPY Price Forecast: Climbs above 109.50 as technicals support bullish outlook

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The AUD/JPY cross attracts some buyers to near 109.60 during the early European session on Tuesday. Traders remain concerned over Japan's fiscal health amid expectations that Prime Minister Sanae Takaichi will announce more stimulus to boost the economy.

AUD/JPY drifts higher to around 109.60 in Tuesday’s early European session.
The constructive outlook for the cross remains intact, with the price holding above the 100-day EMA.
The first upside barrier emerges at 110.60; the initial support level to watch is 109.00.

A hawkish stance from the Reserve Bank of Australia (RBA) could underpin the Australian Dollar (AUD) against the Japanese Yen (JPY). Stronger-than-expected economic data have reinforced expectations that the Australian central bank would keep a tightening bias to address persistent inflationary pressures.

Traders brace for the Australian Consumer Price Index (CPI) inflation data, which is due later on Wednesday. The headline CPI is expected to show a rise of 3.7% YoY in January, compared to 3.8% prior. Any signs of softer inflation in Australia could drag the Aussie lower in the near term.

Technical Analysis:

In the daily chart, AUD/JPY holds above the 100-period EMA, sustaining the prevailing uptrend. The slope remains positive, underpinning pullbacks. Price sits above the middle Bollinger Band as the bands narrow, signaling reduced volatility with a mild bullish bias. RSI at 59.95 is rising above its midline, affirming momentum on the topside without overbought risk.

Immediate resistance sits at the upper Bollinger Band at 110.60, and a daily close above this barrier would open room for an extension of the advance. Initial support aligns with the middle band at 109.00, with secondary support at the lower band at 107.37. With bands contracting, a break of either boundary could set the next directional leg, while the RSI’s steady climb would favor continuation if resistance gives way.

(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.