AUD/JPY Price Forecast: Softens below 112.50 as near-term bearish bias persists below 100-day SMA

AUD/JPY weakens to around 112.35 in Thursday’s early European session.
The negative outlook of the cross remains intact in the near term under the 100-day SMA.
The first upside barrier emerges at 112.70; the initial support level is seen at 111.63.

Lallalit Srijandorn FXStreet

The AUD/JPY cross trades in negative territory near 112.35 during the early European session on Thursday. The Japanese Yen (JPY) edges higher against the Australian Dollar (AUD) as traders are on high alert for further intervention from authorities. Reserve Bank of Australia (RBA) Governor Michele Bullock is scheduled to speak later on Friday.

Goldman Sachs Research strategist Karen Fishman said that the JPY’s gains are now fading as the intervention is “not a sustainable fix ... ultimately just buys some time.”

Meanwhile, the Bank of Japan (BoJ) highlighted growing risks of accelerating inflation in its summary of opinions from the July meeting, with one board member suggesting that the pace of interest rate hikes could accelerate. The BoJ may consider an additional interest rate increase at its next September policy meeting, following a hike in June, in response to rising risks of higher inflation, according to Jiji.

Rare US-Japan FX action underscores shifting Yen dynamics

DBS Group Research underscores the unusual nature of the latest currency support measures, noting that “co-ordinated FX intervention between the US and Japan is rare, with the last joint intervention occurring 15 years ago to weaken an excessively over-valued JPY in the aftermath of the 2011 Tohoku earthquake.” The team highlights that this historical precedent throws the current episode into sharper relief, with policymakers now deploying similarly uncommon tools in response to pronounced Yen weakness rather than strength.

Technical Analysis:

In the daily chart, AUD/JPY leans into a bearish near-term bias as it slips back under the Bollinger Bands 20-period simple moving average and remains capped by the 100-day simple moving average (SMA). Price is still comfortably above the Bollinger lower band, so the broader uptrend is not yet threatened, but the latest Relative Strength Index (14) reading at 48.96 suggests momentum has turned neutral-to-soft after the recent rally stalled near the upper band zone.

On the topside, initial resistance is aligned at the Bollinger Bands 20-period SMA middle line around 112.70, followed by the 100-day SMA at 112.90. A sustained break above these levels would be needed to re-open the path toward the July 16 high of 113.88, en route to the upper Bollinger band near 115.45.

On the downside, the primary support to watch sits at the August 10 low of 111.63. The next contention level to watch is the August 7 low of 110.77, followed by the Bollinger lower band at 110.00, where a decisive move would hint at a deeper corrective phase within the broader trend.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

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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