AUD/JPY Price Forecast: Declines to near 114.00, while maintaining bullish technical bias

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AUD/JPY declines to around 114.00 in Friday’s early European session.
The broader uptrend for the cross remains intact above the key SMA, with bullish RSI momentum.
The first upside barrier emerges at 114.65; the initial support level to watch is 113.70.

The AUD/JPY cross trades in negative territory near 114.00 during the early European session on Friday. Annual core Consumer Price Index (CPI) inflation in Tokyo stayed below the Bank of Japan's (BoJ) 2% target for a fourth consecutive month ‌in May, data showed on Friday. However, analysts expect inflation to re-accelerate in the coming months as surging oil prices and higher import prices from a weak JPY keep the BOJ under pressure to raise interest rates.

On the other hand, traders have scaled back expectations for immediate interest rate hikes by the Reserve Bank of Australia (RBA) after Australia’s CPI inflation rose by less than expected in April, weighing on the Aussie.

Financial markets have priced in nearly a 93% chance that the Australian central bank will hold the Official Cash Rate (OCR) steady at its June policy meeting, according to the ASX RBA Rate Tracker.

Technical Analysis:

In the daily chart, AUD/JPY holds a constructive bullish bias as it consolidates just under the upper Bollinger Band. Price stands well above the 20-day simple moving average (the Bollinger middle band) and the 100-day moving average, suggesting the broader uptrend remains intact despite the latest pause. The Relative Strength Index (14) hovers around 55, indicating neutral-to-positive momentum rather than overbought conditions, which hints that buyers may still have room to extend gains if resistance gives way.

On the topside, immediate resistance is located at the upper Bollinger Band around 114.65; a daily close above this barrier would open the door to a continuation of the advance. On the downside, initial support is seen at the 20-day SMA near 113.70, with further cushions at the lower Bollinger Band around 112.78 and then at the 100-day EMA near 110.77, where a break would be needed to undermine the prevailing bullish structure.

(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.