AUD/JPY Price Forecast: Remains firm above 98.00, Takaichi wins majority in Lower House

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AUD/JPY edges higher to around 98.25 in Tuesday’s early European session.
The cross keeps the bullish view in longer term, but further consolidation cannot be ruled out with neutral RSI indicator.
The first upside barrier is seen at 99.50; the initial support level is located at 97.25.

The AUD/JPY cross trades in positive territory near 98.25 during the early European session on Tuesday. The Japanese Yen (JPY) edges lower against the Australian Dollar (AUD) as the dovish Sanae Takaichi is poised to become the first female Prime Minister. Takaichi is set to be Japan’s first female Prime Minister after getting 237 votes in the Lower House, more than what's needed for a simple majority, BBC reported on Tuesday.

According to the daily chart, the positive view of AUD/JPY remains in place as the cross is well-supported above the key 100-day Exponential Moving Average (EMA). However, the 14-day Relative Strength Index (RSI) hovers around the midline, indicating neutral momentum. This suggests that further consolidation cannot be ruled out before positioning for any near-term AUD/JPY appreciation.

On the bright side, the immediate resistance level for the cross emerges at 99.50, the high of October 14. The crucial upside target to watch is the 100.00 psychological level. Any follow-through buying could pave the way to the upper boundary of the Bollinger Band of 100.35.

On the downside, the crucial support level for AUD/JPY is located at 97.25, the low of October 16. The additional downside filter to watch is 96.70, the 100-day EMA. Further south, the next contention level is seen at 96.40, the lower limit of the Bollinger Band.

AUD/JPY daily chart

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.