AUD/JPY Price Forecast: Advances on improved risk sentiment, holds bullish bias above 100-day EMA

AUD/JPY gains ground near 113.20 in Friday’s early European session.
The positive outlook of the cross remains intact above the key 100-day EMA, with modest bullish RSI momentum.
The first upside barrier emerges at 113.65; the initial support level to watch is 112.50.

Lallalit Srijandorn FXStreet

The AUD/JPY cross trades in positive territory around 113.20 during the early European session on Friday. A potential truce between the United States (US) and Iran improves risk sentiment, supporting the Australian Dollar (AUD) against the Japanese Yen (JPY). The US President Donald Trump administration has been waiting for Iran to respond to its proposal to reopen the Strait of Hormuz and end the war.

On the other hand, fears of further interventions from Japanese authorities might help limit the JPY’s losses. Reuters reported on Friday, citing a source familiar with the matter, that Japan’s officials intervened in the foreign exchange market during holidays in early May after having conducted Japanese Yen-buying operations on April 30. The source said: “The intervention since the start of May was timed to coincide with the holiday period, when market liquidity was thin.”

Technical Analysis:

In the daily chart, AUD/JPY holds a constructive near-term bias as it trades well above the 100-day exponential moving average (EMA), while the Bollinger Bands (20) show price consolidating in the upper half of the envelope. The Relative Strength Index (14) at 52 keeps a neutral-to-positive tone, hinting that upside pressure is moderating but not yet reversing.

On the topside, initial resistance emerges at the Bollinger middle band, the 20-day simple moving average near 113.65, ahead of the recent Bollinger upper band peak around 114.75. On the downside, the lower Bollinger band at 112.50 offers the first line of support. The key contention level to watch is the 100.00 psychological level, with the more important dynamic floor coming in at the 100-day EMA around 109.65, 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.

Author

Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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