AUD/JPY Holds Above 114 as Uptrend Stays Intact

Key Moments

Rangebound Trade Ahead of Key Political Event

AUD/JPY is little changed around 114.10 in early European hours on Wednesday, with price action largely flat as market participants refrain from aggressive positioning. The cross is holding a constructive tone above the 100-day exponential moving average (EMA), supported by a bullish Relative Strength Index (RSI) profile.

Traders are opting for caution ahead of the upcoming meeting between US President Donald Trump and Chinese President Xi Jinping in Beijing on Thursday and Friday. The article notes that any favorable outcome from the Trump-Xi summit has the potential to support the Australian Dollar (AUD), given its sensitivity to developments related to China.

Fundamental Drivers: RBA Outlook and Yen Intervention Risk

Expectations around the Reserve Bank of Australia (RBA) are another factor underpinning the AUD side of the cross. A firm policy stance from the central bank could provide additional backing for the currency. According to HSBC economists,
“Our economists expect the RBA to remain on hold in a ‘wait-and-see’ mode; however, further domestic fiscal support could increase the likelihood of additional tightening,” said HSBC economists.

On the Japanese side, concerns over potential currency intervention remain an important counterbalance. Market apprehension that Japanese authorities could step in again to manage exchange rate moves may lend support to the Japanese Yen (JPY) and limit further gains in AUD/JPY. Japanese Finance Minister Satsuki Katayama and US Treasury Secretary Scott Bessent were reported to have confirmed close coordination in efforts to address currency volatility.

Technical Picture: Bullish Structure Above Key Supports

From a technical standpoint, the daily chart indicates that AUD/JPY is maintaining a generally positive configuration. The pair is consolidating above the 20-day Bollinger simple moving average (SMA) and remains comfortably above the 100-day SMA, implying that the broader upward trend is still valid despite recent pullbacks from prior highs.

The 14-day RSI is hovering around 60, which keeps it in positive territory without signaling overbought conditions. This positioning suggests that bullish momentum is present but has not yet reached extreme levels.

On the topside, the first notable resistance is aligned with the upper Bollinger band, currently tracking near 114.85. A daily close above this region would signal scope for another upward extension within the prevailing bullish trend.

On the downside, initial support is identified around the mid-Bollinger band at 113.75. Below that, the lower band near 112.65 comes into view as an additional buffer. The article highlights the 100-day SMA at 110.05 as a deeper and more strategic support level, anchoring the broader positive structure.

Japanese Yen: Key Characteristics and Market Drivers

The article also provides background on the Japanese Yen (JPY), describing it as one of the most widely traded currencies globally. Its valuation is linked to the overall performance of the Japanese economy and, more specifically, to Bank of Japan (BoJ) policy decisions, interest rate differentials – particularly between Japanese and US government bonds – and prevailing risk sentiment among traders.

One of the BoJ’s core responsibilities includes currency-related considerations, making its actions critical for the Yen. The central bank has at times intervened directly in foreign exchange markets, typically with the aim of weakening the Yen, although it is described as cautious in using this tool frequently due to political sensitivities with key trading partners.

The article notes that an ultra-loose policy stance by the BoJ between 2013 and 2024 contributed to Yen depreciation against major counterparts as policy divergence widened relative to other central banks. The more recent move toward gradually unwinding this highly accommodative stance is cited as a factor offering some support to the currency.

In addition, the piece highlights the impact of yield differentials: a long-standing gap between 10-year US and Japanese government bond yields, driven by different policy settings, previously favored the US Dollar over the Yen. The BoJ’s 2024 decision to start stepping away from ultra-loose conditions, combined with rate cuts at other major central banks, is described as narrowing this yield spread.

Finally, the Yen is characterized as a safe-haven asset. During periods of market turbulence, investors are described as more inclined to seek exposure to the Yen, perceiving it as relatively stable. Such episodes of heightened risk aversion are therefore associated with Yen strength versus currencies that are considered more vulnerable in times of stress.