AUD/JPY Price Forecast: Drifts higher above 112.50, upside momentum fades but remains bullish

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The AUD/JPY cross trades in positive territory around 112.80 during the early European trading hours on Friday. The Australian Dollar (AUD) strengthens against the Japanese Yen (JPY) on hopes that a Middle East peace deal may finally materialize.

AUD/JPY drifts higher to near 112.80 in Friday’s early European session.
The positive view for the cross prevails, but bullish momentum has cooled, with the RSI holding below the midline.
The first upside barrier is located at 133.18; the initial support level to watch is 112.25.

US President Donald Trump said on Thursday that a peace deal could be signed as soon as this weekend, just hours after threatening more strikes on Iran. Trump added that negotiations with Iran had advanced to the highest levels of Iran's leadership and had been approved by a broad coalition of regional powers. The positive developments surrounding the US-Iran peace deal boost a riskier currency, such as the Aussie against the JPY.

A Reuters poll showed on Friday that a majority of economists expect the Reserve Bank of Australia (RBA) to hold its Official Cash Rate (OCR) at 4.35% on June 16, pausing after three hikes. Meanwhile, 26 of 44 economists see the cash rate at 4.35% at end-September, while 18 project 4.60% or higher.

Intervention fears from Japanese authorities might support the Japanese Yen and create a headwind for the cross. Finance Minister Satsuki Katayama said on Tuesday that officials are monitoring speculative moves and remain prepared to take decisive measures to prevent the domestic currency weakness.

Technical Analysis:

In the daily chart, AUD/JPY holds above the 100-day simple moving average (SMA) and the lower Bollinger Band, keeping the broader uptrend underpinned despite the recent pullback from the highs. However, a soft Relative Strength Index (RSI) near 44 hints that bullish momentum has cooled, suggesting upside progress could be more laboured in the near term.

On the topside, initial resistance is located at the June 9 high of 133.18. The next hurdle to watch is the Bollinger middle band around 113.60, with a break there opening the way toward the upper band near 114.95. On the downside, immediate support is seen around the lower Bollinger Band at 112.25 and then the 100-day SMA at 111.82, where buyers would be expected to defend the broader 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.