AUD/JPY Price Forecast: Retreats below 111.00, but holds firm above 100-day EMA

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The AUD/JPY cross attracts some sellers to around 110.80 during the early European session on Friday. The Japanese Yen (JPY) gathers strength against the Aussie on hawkish comments from Bank of Japan (BoJ) officials.

AUD/JPY softens to near 110.80 in Friday’s early European session.
The cross maintains a constructive outlook above the key 100-day EMA.
The first upside barrier emerges at 111.40; the initial support level to watch is 110.00.

BoJ board member Hajime Takata on Thursday backed expectations that the Japanese central bank remains on a tightening path. “I believe the bank should make a further gear shift and engage in communication that assumes that the price stability target is almost achieved,” he said.

On the other hand, hotter-than-expected Australian inflation has shifted market expectations toward further interest rate hikes from the Reserve Bank of Australia (RBA). This, in turn, could lift the Australian Dollar (AUD) against the JPY.

Australia’s CPI climbed by 3.8% YoY in January, compared to a 3.8% increase in December, according to the Australian Bureau of Statistics (ABS) on Wednesday. The market consensus was for 3.7% growth in the reported period.

Technical Analysis:

In the daily-chart chart, AUD/JPY is bullish in the near-term. The price holds well above the rising 100-day exponential moving average near 104.80, confirming an established uptrend that has accelerated over recent weeks. Daily closes continue to track near the upper Bollinger Band, signalling persistent upside pressure despite stretched conditions after the latest push through 111.00. The RSI at 63.63 remains in bullish territory but below overbought levels, indicating ongoing buying interest with only moderate signs of momentum fatigue.

Initial resistance is seen at the recent 111.40 zone, where the latest high coincides with the upper Bollinger Band and has capped further gains so far; a daily close above this area would open the way toward 112.00 next. On the downside, immediate support emerges at 110.00, followed by firmer backing at 109.20, which aligns with the mid-Bollinger band region and the prior breakout area.

(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.