AUD/JPY Price Forecast: Retains bullish momentum above 100-day EMA despite threat of intervention

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The AUD/JPY cross attracts some sellers near 106.55 during the early European session on Monday. The Japanese Yen (JPY) strengthens against the Australian Dollar (AUD) amid the threat of intervention from Japanese authorities.

AUD/JPY weakens to around 106.55 in Monday’s early European session.
Markets are on heightened alert for Japanese government intervention.
The cross maintains a positive outlook above the 100-day EMA, with bullish RSI momentum.
The initial support level to watch is 105.90; the first upside barrier emerges at 107.85.

On Friday, traders reported that the Federal Reserve Bank of New York had contacted financial institutions to ask about the Japanese Yen’s exchange rate. This action has sparked intervention speculation and lifted the JPY across the board.

Furthermore, Japan’s Prime Minister Sanae Takaichi said on Sunday that the government will take necessary steps against speculative and abnormal market moves. Nonetheless, she didn’t specify which market her remarks were referring to.

"The weak yen has become problematic ... in the sense that it's unpopular with the public, because the weak yen is seen as contributing to the inflation problem. So perhaps ... this intervention threat itself is an attempt to check the yen weakness and prevent it from becoming a political issue,” said Moh Siong Sim, FX strategist at OCBC Singapore.

Traders brace for the Australian December Consumer Price Index (CPI) inflation data on Wednesday for fresh impetus. Any signs of hotter inflation in Australia could help limit the Aussie’s losses in the near term.

Technical Analysis:

In the daily chart, AUD/JPY holds well above the 100-day EMA at 102.14, whose rising slope supports a firm bullish bias. The distance to this average underscores trend strength while marking dynamic support. RSI at 57.69 has eased from prior stretched readings but remains above the 50 line, preserving positive momentum. Price trades in the upper half of the Bollinger envelope as bands widen modestly, indicating persistent buying pressure; the middle band at 105.90 underpins, while the upper band at 107.85 caps the immediate topside.

Holding above the middle band would keep the advance intact and keep focus on a test of the upper Bollinger, where a decisive close could extend the move. A break beneath the mid-band would expose the lower Bollinger Band at 103.97, with the 100-day EMA at 102.14 acting as trend-defining support if pullbacks deepen.

(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.