AUD/JPY Price Forecast: Holds gains above 114.00, bullish momentum prevails

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The AUD/JPY cross gathers strength near 114.00 during the early European trading hours on Tuesday. A hawkish tone from the Reserve Bank of Australia (RBA) provides some support to the Australian Dollar (AUD) against the Japanese Yen (JPY).

AUD/JPY strengthens to around 114.00 in Tuesday’s early European session.
The constructive outlook for the cross remains intact above the 100-day EMA, with bullish RSI momentum.
The immediate resistance level emerges at 114.32; the initial support level is seen at 113.75.

The Australian central bank signaled that more rate hikes were on the horizon, with its economic forecasts pencilling in a 4.70% policy rate by the end of 2026, with no cuts expected until 2028, according to CNBC.

On the other hand, the potential for further intervention from the Japanese authorities might underpin the JPY and cap the upside for the cross. Japanese officials reportedly intervened in the currency market again during the Golden Week.

Furthermore, Japan’s Finance Minister Satsuki Katayama said on Tuesday that Japan and the United States (US) reaffirmed their ‌close cooperation on currency moves. Last week, Japan’s top foreign exchange official Atsushi Mimura stated that continued intervention was possible.

Technical Analysis:

In the daily chart, AUD/JPY holds a constructive bullish tone as it consolidates above the 20-day Bollinger simple moving average and well above the 100-day exponential moving average. Price is lodged in the upper half of the Bollinger envelope with the upper band acting as nearby resistance, while the Relative Strength Index at about 59 stays in positive territory without yet signaling overbought conditions, suggesting persistent but not overstretched upside momentum.

On the topside, immediate resistance emerges at the May 6 high of 114.32. The next hurdle to watch is the Bollinger upper band of 114.80, and a daily close above this cap would open the way for a continuation of the uptrend. On the downside, initial support is provided by the Bollinger middle band at 113.75, ahead of secondary protection at the lower band around 112.67, with the 100-day EMA further below near 109.82 acting as a deeper trend-defining floor as long as the pair trades comfortably above it.

(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.