AUD/JPY Pulls Back Near 114.00, Bullish Structure Holds

Key Moments

Spot Action and Macro Backdrop

The AUD/JPY cross came under pressure around 113.95 in early European trading on Thursday, as sellers emerged after the recent advance. Uncertainty surrounding Iran’s role in any additional peace negotiations helped underpin demand for safe-haven assets, providing some support to the Japanese Yen (JPY) against the Australian Dollar (AUD).

Concerns about potential official intervention also appeared to be limiting the pair’s upside. Japanese policymakers, including Finance Minister Satsuki Katayama, emphasized a “high sense of urgency” about speculative moves and weakness in the Yen linked to tensions in the Middle East.

Technical Overview

On the daily chart, AUD/JPY remained comfortably above both the Bollinger middle band and the 100-period exponential moving average (EMA), maintaining a clearly bullish near-term bias despite the latest pause in the rally. Price action was pressing toward the upper Bollinger band resistance at 115.58, with the Relative Strength Index (RSI) standing at 65.9 and edging into overbought territory. This configuration pointed to strong upside momentum, while also suggesting the possibility of intermittent consolidation.

A clear move above the upper Bollinger band near 115.60 would signal scope for further appreciation and continuation of the prevailing uptrend. On the downside, initial support was located at the April 20 trough at 113.09. Below that, the Bollinger middle band around 112.12 was identified as the next area of interest, followed by more substantial support from the 100-period EMA at 108.73 and the lower Bollinger band at 108.65, where buyers would be expected to step back in if a sharper correction unfolded.

Japanese Yen: Background and Key Drivers

The Japanese Yen (JPY) is among the most actively traded currencies globally. Its valuation is broadly influenced by the performance of Japan’s economy, and more specifically by Bank of Japan (BoJ) policy decisions, interest-rate differentials between Japanese and U.S. government bonds, and overall risk appetite or aversion in financial markets, among other elements.

One of the BoJ’s mandates is currency control, so its actions are pivotal for the Yen. The BoJ has at times intervened directly in foreign-exchange markets, generally to reduce the Yen’s value, though such moves are infrequent due to political sensitivities with major trading partners. The BoJ’s ultra-loose monetary stance between 2013 and 2024 caused the Yen to weaken against many peers because of widening policy divergence with other leading central banks. More recently, a gradual unwinding of that ultra-loose framework has provided some support to the currency.

Over the past decade, the BoJ’s commitment to very accommodative policy contributed to an expanding gap between yields on 10-year U.S. Treasuries and Japanese government bonds, which supported the U.S. Dollar against the Yen. The BoJ’s 2024 decision to start moving away from its ultra-loose stance, combined with rate cuts in other major economies, has been narrowing that yield spread.

The Yen is also widely regarded as a safe-haven asset. In periods of market stress, investors tend to favor the Yen because of its perceived stability and reliability. As a result, episodes of heightened turbulence often lead to Yen strength against currencies viewed as relatively riskier.