AUD/JPY Climbs as RBA Rate Hike Supports Bullish Bias

Key Moments

RBA Tightening Lifts Aussie Against Yen

The AUD/JPY cross is posting modest gains around 113.00 during the early European session on Wednesday, with the Australian Dollar strengthening against the Japanese Yen in the wake of a fresh rate hike by the Reserve Bank of Australia (RBA) and a continued hawkish policy stance.

At its March policy meeting on Tuesday, the RBA increased the Official Cash Rate (OCR) by 25 basis points to 4.10%. This move followed a similar 25 basis-point hike in February, marking the first consecutive increases since mid-2023. During the subsequent press conference, Governor Michele Bullock remarked that prices remained too elevated and highlighted concerns on the board about second-round effects from higher energy costs linked to the Middle East conflict.

Data Watch: Australian Labor Market and External Risks

Market focus is now turning to Australia’s labor market report for February, which is scheduled for release later on Thursday. Consensus expectations point to the Unemployment Rate holding steady at 4.1% in February. Any indications of deterioration in labor conditions could weigh on the Australian Dollar in the near term.

Traders are also closely following developments in the Middle East. According to the article, Iranian security chief Ali Larijani was killed in Israeli air strikes, per BBC. In response, Iranian army chief Amir Hatami pledged to undertake a “decisive and regrettable” retaliation for the killing of security chief Ali Larijani in an Israeli airstrike. Heightened fears of a drawn-out conflict in the region could increase demand for safe-haven assets, supporting the Japanese Yen and potentially limiting further upside in the AUD/JPY pair.

Technical Picture: Bullish Structure Intact

On the daily chart, the near-term technical outlook for AUD/JPY remains constructive, with price trading well above the 100-day exponential moving average, currently around 106.40. This configuration preserves the broader uptrend. Recent candles are moving above the rising middle line of the Bollinger Bands, while the upper band is extending higher, indicating firm upside volatility.

The daily Relative Strength Index (RSI) is hovering in the low 60s, remaining in positive territory without reaching overbought conditions. This backdrop suggests that buying interest is being sustained rather than reflecting a short-lived spike.

Immediate resistance is located at the recent high near 113.70, reinforced by the upper Bollinger Band around 113.80. A daily close above this band would clear the way for a potential advance toward the 115.00 region.

On the downside, initial support lies at 111.40, where the middle Bollinger Band currently sits. Below that, the 110.15–110.35 area represents the next support band, coinciding with a previous consolidation zone and the mid-October Bollinger cluster. A more pronounced correction could bring the 108.70 region into focus, just above the 100-day EMA and near the lower part of the recent Bollinger structure. Only a sustained drop below that area would materially challenge the prevailing bullish configuration.

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

Background: Japanese Yen Dynamics

The Japanese Yen (JPY) is described as one of the most actively traded global currencies. Its valuation is broadly influenced by Japan’s economic performance, the Bank of Japan’s (BoJ) policy stance, yield differentials between Japanese and U.S. government bonds, and overall market risk sentiment, among other drivers.

The BoJ has a mandate that includes currency control, making its actions central to movements in the Yen. The central bank has at times intervened directly in the foreign exchange market, typically with the aim of pushing the Yen lower, although it has generally limited such operations due to political considerations involving key trading partners.

According to the article, “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 past decade, the BoJ’s commitment to very accommodative policy contributed to a widening gap between yields on 10-year U.S. and Japanese government bonds, favoring the U.S. Dollar over the Japanese Yen. The article notes that the BoJ’s 2024 decision to start moving away from ultra-loose policy, together with interest-rate cuts in other major economies, is narrowing this spread.

The Yen is also characterized as a traditional safe-haven currency. In periods of heightened market turbulence or stress, investors are more inclined to seek exposure to JPY, perceiving it as relatively stable and reliable. Such episodes tend to bolster the Yen’s value against currencies viewed as riskier.