AUD/JPY Price Forecast: Grinds higher above 112.50, yet stays constrained by mildly bearish bias

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The AUD/JPY cross gathers strength to near 112.55 during the early European trading hours on Tuesday.

AUD/JPY gains ground to around 112.55 in Tuesday’s early European session.
The cross maintains a mildly bearish bias; further consolidative mode cannot be ruled out with neutral RSI momentum.
The immediate resistance level is seen at 112.60; the initial support level to watch is 112.30.

The AUD/JPY cross gathers strength to near 112.55 during the early European trading hours on Tuesday. The Japanese Yen (JPY) attracts some sellers against the Australian Dollar (AUD) after Reuters reported on Monday that Tokyo had no immediate plans to alter the asset allocation of its state pension funds, reducing expectations of near-term support for domestic assets.

Nonetheless, Japan’s Finance Minister Satsuki Katayama said the country’s massive pension fund would adjust its holdings if necessary, while also proposing the inclusion of government bonds in a tax-free investment program for individual investors.

Technical Analysis:

In the daily chart, AUD/JPY retains a mildly bearish bias as it holds just beneath the 100-day simple moving average (SMA). Price remains above the Bollinger middle band, suggesting some near-term demand, but the proximity of the upper band and the capping 100-day SMA reinforces a topside-constrained tone. The Relative Strength Index (RSI) at 49.81 sits near neutral, hinting at consolidative momentum rather than a clear directional drive.

On the topside, immediate resistance is seen at the 100-day SMA at 112.60, with a break exposing the Bollinger upper band near 113.40 as the next barrier. On the downside, initial support aligns with the Bollinger middle band at 112.30, ahead of a deeper cushion at the lower band around 111.25, where stronger buyers could attempt to reassert control if the current drift extends.

(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.