AUD/JPY Price Forecast: Strengthens above 113.00, hawkish RBA supports uptrend above 100-day SMA

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The AUD/JPY cross trades in positive territory around 113.05 during the early European trading hours on Monday. A hawkish stance from the Reserve Bank of Australia (RBA) underpins the Australian Dollar (AUD) against the Japanese Yen (JPY).

AUD/JPY gains ground to near 113.05 in Monday’s early Asian session.
Positive outlook for the cross prevails above the 100-day SMA, further consolidation cannot be ruled out with fading RSI momentum.
The first upside barrier emerges at 113.90; the initial support level to watch is 112.90.

RBA Governor Michele Bullock last week emphasized that the Australian central bank remains strictly focused on curbing inflation, following three interest rate hikes earlier this year that pushed the cash rate to 4.35%. Bullock further stated that inflation is too high, and the board will do what it considers necessary to achieve our mandate to deliver price stability and full employment.

However, the potential upside for the cross might be limited amid intervention fears from Japanese authorities. Japanese Finance Minister Satsuki Katayama said on Friday that officials are monitoring the situation and reserve the right to take "decisive action" and "respond appropriately at any time" against excessive volatility.

Technical Analysis:

In the daily chart, AUD/JPY holds in a constructive stance above the 100-day simple moving average, while the Bollinger lower band adds nearby downside protection, keeping the broader uptrend intact despite the recent pullback from highs. The Relative Strength Index (RSI) at 43.94 has slipped below the neutral 50 line, hinting at fading bullish momentum but not yet signaling a decisive trend reversal as price still sits comfortably over the major average.

On the topside, initial resistance emerges at the Bollinger middle band around 113.90, with the Bollinger upper band at 114.90 acting as the next bullish target if buyers regain control. On the downside, a daily close back under the 112.90 lower band would expose the 100-day SMA at 111.60, where stronger demand would be expected to appear while the medium-term bullish structure remains in place above that level.

(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.