Key Moments
- AUD/JPY extends its pullback to around 110.85 in early European trading on Wednesday.
- Australia’s February CPI rises 3.7% YoY, undershooting the 3.8% prior reading and market expectations.
- Reports of Iranian missile strikes and ongoing US-Iran discussions support demand for safe-haven JPY.
Market Overview
The AUD/JPY pair weakens to approximately 110.85 during the early European session on Wednesday, as the Australian Dollar comes under pressure against the Japanese Yen. The move follows cooler-than-anticipated Australian inflation data and heightened geopolitical uncertainty linked to US-Iran developments, both of which help underpin demand for the Yen.
Australian Inflation Data Dampens AUD
Figures from the Australian Bureau of Statistics (ABS) released on Wednesday show that the Consumer Price Index (CPI) increased by 3.7% year-on-year in February, compared with 3.8% previously. The outcome fell short of the 3.8% level expected by markets.
On a monthly basis, CPI was flat at 0% in February, down from the prior 0.4% reading and matching the market consensus of 0%. The softer inflation profile weighs on the Australian Dollar, contributing to the cross’s decline.
| Australian CPI Data – February | Actual | Previous | Market Consensus |
|---|---|---|---|
| Year-on-year CPI | 3.7% | 3.8% | 3.8% |
| Month-on-month CPI | 0% | 0.4% | 0% |
Middle East Tensions Support Safe-Haven Yen
Geopolitical developments further influence the cross. According to the report, the Iranian military stated on Wednesday that it had launched missiles at Israel and at military facilities hosting US forces in Kuwait, Jordan, and Bahrain. This escalation came as the United States sent Iran a 15-point proposal aimed at ending the conflict in the Middle East.
Prospects of a drawn-out confrontation have the potential to bolster safe-haven assets such as the Japanese Yen, creating a headwind for AUD/JPY. At the same time, any signs that tensions between the US and Iran are easing could help curb downside pressure on the Australian Dollar.
Technical Picture: Uptrend Intact Despite Pullback
On the daily chart, the near-term outlook for AUD/JPY remains mildly constructive. Price action continues to trade above the 100-day exponential moving average (EMA), which is positioned near 106.90, and the broader uptrend structure is still respected. The Relative Strength Index (RSI) has slipped from overbought territory toward the high-40s, signaling that earlier bullish momentum is cooling without yet confirming a clear advantage for sellers.
| Technical Levels – AUD/JPY | Level | Comment |
|---|---|---|
| Immediate support | 110.00 | Recent swing area |
| Next support | 109.20 | Deeper downside floor |
| Key support zone | 108.00 | Protects 100-day EMA and broader bullish structure |
| Initial resistance | 113.20 | Recent high |
| Next resistance | 114.50 | Target if upside momentum resumes |
Immediate support is seen around the recent swing zone close to 110.00. Below that, additional downside protection is identified near 109.20, while the 108.00 area is viewed as a critical level that shields the 100-day EMA and the prevailing bullish structure. On the topside, initial resistance is located near the recent peak at 113.20, with a further barrier at 114.50 if buying interest strengthens again.
(The technical analysis of this story was written with the help of an AI tool.)
Japanese Yen: Key Characteristics
The Japanese Yen (JPY) is among the most actively traded currencies worldwide. Its valuation is shaped by the performance of the Japanese economy and, more specifically, by the policy stance of the Bank of Japan (BoJ), the interest-rate gap between Japanese and US government bonds, and overall risk appetite in global markets, among other drivers.
Bank of Japan Policy and Its Impact on JPY
One of the BoJ’s roles includes managing the currency, making its decisions highly relevant for the Yen. The central bank has, at times, directly intervened in foreign exchange markets, typically with the aim of pushing the Yen lower, although such actions are used sparingly due to political sensitivities with major trading partners.
The BoJ’s ultra-loose policy stance between 2013 and 2024 contributed to a weaker Yen against other major currencies as monetary settings diverged from those of other key central banks. More recently, a gradual shift away from this ultra-accommodative framework has provided some support to the currency.
Yield Differentials and Risk Sentiment
The BoJ’s preference for very accommodative monetary conditions over the past decade encouraged a wide interest-rate gap between Japanese and US 10-year government bonds, which tended to favor the US Dollar over the Yen. The BoJ’s 2024 move to slowly move away from its ultra-loose stance, combined with rate cuts by some other major central banks, has started to narrow this yield spread.
The Yen is also widely regarded as a safe-haven asset. During periods of heightened market stress, investors often seek the perceived stability of the Japanese currency, which can lead to Yen appreciation relative to currencies considered riskier. As a result, episodes of turbulence in global markets typically enhance the Yen’s attractiveness.
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