AUD/JPY Extends Rally as Risk Mood, Technicals Support

Key Moments

AUD/JPY traded near 113.20 in early European dealings on Friday, maintaining gains above the 100-day EMA.
Improved risk sentiment tied to a potential US-Iran truce supported AUD strength, while concerns over Japanese FX intervention limited JPY downside.
Key technical levels included resistance at 113.65 and 114.75, with initial support at 112.50 and a major floor near the 100-day EMA around 109.65.

Risk-On Mood Lifts AUD/JPY

AUD/JPY advanced in early European trading on Friday, with the pair changing hands close to 113.20 and holding a constructive tone above its 100-day exponential moving average (EMA). The cross retained a bullish bias, underpinned by modest positive momentum on the Relative Strength Index (RSI), while market participants kept a close eye on nearby support and resistance levels.

Improved risk sentiment helped drive demand for the Australian Dollar (AUD) against the Japanese Yen (JPY). A potential truce between the United States and Iran was seen as easing geopolitical tensions, which in turn buoyed risk-sensitive assets. The article noted that the US President Donald Trump administration had been waiting for Iran’s response to a proposal aimed at reopening the Strait of Hormuz and bringing the war to an end.

Japan Intervention Concerns Temper Yen Weakness

At the same time, expectations that Japanese authorities might step in again to support the Yen helped cap JPY losses. According to a Reuters report on Friday, citing a source familiar with the matter, Japanese officials intervened in the foreign exchange market during holidays in early May after conducting Yen-buying operations on April 30.

The source was quoted as saying: “The intervention since the start of May was timed to coincide with the holiday period, when market liquidity was thin.” This backdrop reinforced the view that authorities remain sensitive to rapid JPY depreciation, adding a potential brake on further AUD/JPY upside.

Technical Picture: Bullish Structure Intact

On the daily chart, AUD/JPY continued to display a supportive near-term structure. The pair was trading comfortably above the 100-day EMA, while Bollinger Bands (20) indicated that price action was consolidating in the upper half of the band, consistent with a constructive bias.

The 14-day RSI stood at 52, reflecting a neutral-to-positive tone. This suggested that while buying pressure had cooled somewhat, there were no clear signs of a reversal in the prevailing uptrend.

Key Levels to Watch

Market participants focused on several well-defined technical levels in the short term. On the upside, the first notable resistance was located at the Bollinger middle band, which coincided with the 20-day simple moving average around 113.65. Above that, attention turned to the most recent upper Bollinger band peak near 114.75 as the next potential hurdle.

On the downside, the lower Bollinger band around 112.50 was identified as the initial support zone. A more significant area of interest lay at the 100.00 psychological level, with the 100-day EMA near 109.65 viewed as a critical dynamic support. A decisive break below that EMA would be required to challenge the current bullish technical structure.

Level	Type	Description	Approximate Value
114.75	Resistance	Recent Bollinger upper band peak	114.75
113.65	Resistance	Bollinger middle band / 20-day SMA	113.65
113.20	Spot area	Early European session trading zone	113.20
112.50	Support	Lower Bollinger band	112.50
100.00	Support	Psychological level	100.00
109.65	Support	100-day EMA (key dynamic floor)	109.65

The article noted that the technical analysis was prepared with assistance from an AI tool.

Japanese Yen: Background Factors

The Japanese Yen (JPY) is described as one of the most heavily traded global currencies. Its valuation is influenced by the broader performance of Japan’s economy and, more specifically, by the Bank of Japan’s (BoJ) policy stance, yield differentials between Japanese and US government bonds, and shifts in overall market risk appetite, among other elements.

One of the BoJ’s responsibilities is currency control, making its decisions highly relevant for the Yen. The central bank has, at times, intervened directly in foreign exchange markets, typically with the aim of pushing the Yen lower, although such measures are used sparingly due to political sensitivities with key trading partners.

The article stated that the BoJ’s ultra-loose monetary policy between 2013 and 2024 contributed to Yen depreciation against major peers, as policy diverged from that of other central banks. More recently, a gradual unwinding of that ultra-loose stance has provided some support to the Yen.

Over the past decade, the BoJ’s commitment to very accommodative policy led to a widening interest rate gap between Japan and other economies, particularly the United States. This widened the yield spread between 10-year US Treasuries and Japanese government bonds, benefiting the US Dollar relative to the Yen. The BoJ’s 2024 decision to slowly move away from its ultra-loose framework, together with rate cuts in other major economies, has started to narrow this differential.

The Yen is also often perceived as a safe-haven asset. During periods of market stress, investors are more inclined to seek shelter in JPY due to its perceived stability, which tends to strengthen the currency against those seen as riskier. Conversely, calmer or more optimistic market conditions can reduce safe-haven demand and weigh on the Yen.