Key Moments
- AUD/JPY attracts selling interest around 105.00 in early European trade on Thursday.
- Bank of Japan leaves regional economic assessments unchanged, reinforcing expectations of continued policy normalization.
- AUD/JPY remains above key moving averages and Bollinger Band midline, with initial support highlighted near 102.65.
Cross Pair Moves Lower as Yen Strengthens
The AUD/JPY cross faces fresh selling pressure near the 105.00 level during the early European session on Thursday. The move reflects a firmer Japanese Yen (JPY) against the Australian Dollar (AUD), as market participants increasingly accept that the Bank of Japan (BoJ) is likely to maintain its path toward policy normalization.
A January report from the BoJ indicated that the central bank made no adjustments to its economic assessments for any of the nine regions it monitors. Most of these regions described their local economies as either “recovering moderately” or “picking up moderately.”
Australia Data Keeps RBA Outlook Clouded
On the Australian side, a mixed Consumer Price Index (CPI) inflation print for November has left the Reserve Bank of Australia’s (RBA) policy trajectory unclear, weighing on the AUD. Despite the uncertainty, RBA Deputy Governor Andrew Hauser stated on Thursday that the November inflation figures were broadly in line with expectations and noted that rate cuts are unlikely in the near term.
Technical Picture: Bullish Bias Intact Above Key Averages
From a technical standpoint, the daily chart shows AUD/JPY trading comfortably above its rising 100-day exponential moving average (100-EMA) at 100.79 and the 20-period simple moving average (SMA) at 104.35, preserving a bullish bias. The upward slopes of both averages suggest that dips may attract buyers around these levels.
The relative strength index (RSI) stands at 62.04, indicating a neutral-to-bullish posture and pointing to steady upside momentum without signaling overbought conditions.
Volatility Metrics and Key Levels
Bollinger Bands on the daily timeframe are edging higher and widening moderately, signaling rising volatility within the existing uptrend. Spot prices are trading above the middle band and tilting toward the upper band at 106.05, which currently acts as a cap on near-term gains. A daily close above this upper band could open the door to further upside, while failure to clear it may keep price action confined toward the middle band.
On the downside, a move below the middle band would shift attention to the lower Bollinger Band at 102.65, which is viewed as a stronger support area. Together with the 100-EMA and 20-period SMA, these levels define the initial technical support structure for the cross.
| Indicator / Level | Value | Implication |
|---|---|---|
| 100-day EMA | 100.79 | Major trend support; above it, bias remains bullish |
| 20-period SMA | 104.35 | Near-term dynamic support; pullbacks may find buyers |
| RSI (daily) | 62.04 | Neutral-bullish momentum, no overbought signal |
| Upper Bollinger Band | 106.05 | Immediate resistance; close above could extend gains |
| Lower Bollinger Band | 102.65 | Key support area below the midline |
(The technical analysis of this story was written with the help of an AI tool)
Background: Drivers of 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.
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.
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.
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.
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