AUD/JPY Holds Above 114 as Hawkish RBA Supports Bulls

Key Moments

Spot Action and Policy Backdrop

AUD/JPY is trading close to 114.00 during the early European session on Tuesday, extending its recent strength. The pair is benefiting from support for the Australian Dollar (AUD) against the Japanese Yen (JPY) following a hawkish tone from the Reserve Bank of Australia (RBA).

The Australian central bank has indicated that further rate increases are anticipated. Its projections point to a policy rate of 4.70% by the end of 2026, with no reductions expected until 2028, according to CNBC.

On the Japanese side, expectations that authorities may intervene again in the foreign exchange market could provide support for the Yen and act as a counterweight to further gains in AUD/JPY. Japanese officials reportedly stepped into the market again during the Golden Week period.

Japan’s Finance Minister Satsuki Katayama stated on Tuesday that Japan and the United States reaffirmed their close coordination on currency developments. Last week, Japan’s top foreign exchange official Atsushi Mimura remarked that “continued intervention was possible.”

Technical Picture: Bullish Bias Intact

On the daily chart, AUD/JPY maintains a constructive bullish profile as it remains above the 20-day Bollinger simple moving average and comfortably above the 100-day exponential moving average (EMA). The exchange rate is holding in the upper half of the Bollinger bands, with the upper band acting as nearby resistance.

The Relative Strength Index (RSI) is hovering around 59, staying in positive territory while still below overbought levels. This configuration points to ongoing upside momentum that has not yet reached stretched conditions.

Key Levels to Watch

On the topside, the initial resistance is found at the May 6 high of 114.32. Above that, the next key obstacle is the upper Bollinger band near 114.80. A daily close above this latter level would pave the way for a continuation of the prevailing uptrend.

On the downside, the first area of support is located at the middle Bollinger band at 113.75. Below that, additional support emerges near the lower Bollinger band around 112.67. The 100-day EMA, currently near 109.82, remains an important longer-term support zone as long as the pair continues to trade comfortably above it.

Japanese Yen: Key Drivers in Focus

The Japanese Yen (JPY) is described as one of the most actively traded currencies globally. Its value is broadly linked to the performance of the Japanese economy, and more specifically to the Bank of Japan’s (BoJ) policy stance, the spread between Japanese and US bond yields, and broader risk sentiment, among other influences.

One of the BoJ’s mandates is currency control, so its decisions play a central role for the Yen. The BoJ has at times intervened directly in foreign exchange markets, generally seeking to weaken the Yen, although it tends to avoid frequent interventions due to political sensitivities with major trading partners. An extended period of ultra-loose monetary policy from 2013 to 2024 led to Yen depreciation against key peers as policy diverged from other major central banks. The subsequent gradual unwinding of this stance has recently lent some support to the currency.

The divergence between Japanese and US bond yields is another critical factor. The BoJ’s prolonged ultra-loose stance contributed to a widening yield gap versus US Treasuries, which supported the US Dollar against the Yen. The BoJ’s 2024 decision to begin moving away from that ultra-loose policy, combined with rate cuts in some other major economies, is narrowing this yield differential.

The Yen is also frequently regarded as a safe-haven asset. During periods of market turbulence, investors are more inclined to seek exposure to the Japanese currency, reflecting its perceived stability and reliability. Such episodes of stress typically strengthen the Yen against currencies seen as comparatively riskier.