Key Moments
- AUD/JPY trades around 113.05 in Monday trading, maintaining gains above the 100-day simple moving average.
- RBA Governor Michele Bullock reiterates commitment to fighting inflation after lifting the cash rate to 4.35% this year.
- Technical setup points to resistance at 113.90 and 114.90, with key support levels at 112.90 and 111.60.
Cross Supported Above 113.00 in Early Trading
AUD/JPY is trading higher near 113.05 in Monday’s early European session, extending gains seen in the Asian hours. The cross remains in positive territory as the Australian Dollar (AUD) is buoyed by a hawkish policy stance from the Reserve Bank of Australia (RBA) against the Japanese Yen (JPY).
The broader constructive tone in AUD/JPY is being reinforced by price action above the 100-day simple moving average (SMA), although slowing momentum on the Relative Strength Index (RSI) suggests that further consolidation cannot be excluded.
RBA’s Hawkish Message Underpins the Australian Dollar
RBA Governor Michele Bullock recently underlined that the central bank remains firmly focused on bringing inflation under control. This follows three interest rate increases earlier this year that lifted the cash rate to 4.35%.
Bullock said that inflation remains elevated and stressed that the board will act as needed to meet its objectives of price stability and full employment. This stance continues to lend support to the AUD relative to the JPY.
Japanese Authorities Highlight Intervention Readiness
On the Japanese side, any additional upside in AUD/JPY may face headwinds from the risk of official intervention. Japanese Finance Minister Satsuki Katayama stated on Friday that authorities are closely monitoring market developments and maintain the option to take “decisive action” and “respond appropriately at any time” in response to excessive volatility.
Technical Picture: Uptrend Intact Above 100-Day SMA
From a technical perspective, the daily chart shows AUD/JPY holding a constructive bias while trading above the 100-day SMA. The lower Bollinger band is positioned nearby, offering additional support and helping to preserve the broader uptrend despite the recent retreat from prior peaks.
The RSI stands at 43.94, below the neutral 50 threshold. This drop points to waning bullish momentum but does not yet confirm a clear trend reversal, as price action remains comfortably above the major moving average.
Key Levels: Resistance and Support Zones
On the upside, the first resistance level is located near the middle Bollinger band around 113.90. If buyers reassert control, the upper Bollinger band at 114.90 would come into view as the next bullish objective.
On the downside, a daily close back below the 112.90 lower band would expose the 100-day SMA at 111.60, where stronger buying interest is anticipated while the medium-term bullish setup stays intact above that level.
| Level | Type | Comment |
|---|---|---|
| 114.90 | Resistance | Bollinger upper band, next bullish target if upside momentum returns |
| 113.90 | Resistance | Bollinger middle band, initial upside barrier |
| 113.05 | Spot | Trading area in early Monday European session |
| 112.90 | Support | First downside level; break would open the way to the 100-day SMA |
| 111.60 | Support | 100-day SMA, key level for maintaining the medium-term bullish structure |
Background on the Japanese Yen
The Japanese Yen (JPY) is one of the world’s most actively traded currencies. Its valuation is influenced by the performance of the Japanese economy, the policy stance of the Bank of Japan (BoJ), the yield differential between Japanese and U.S. government bonds, and overall risk sentiment in global markets, among other elements.
Bank of Japan Policy and Its Influence on JPY
One of the BoJ’s mandates is currency control, making its decisions particularly important for the Yen. The central bank has at times intervened directly in the foreign exchange market, typically to weaken the currency, though it is cautious about such measures because of political sensitivities with major trading partners.
The BoJ’s ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradual unwinding of this ultra-loose policy has given some support to the Yen.
Yield Differentials and Risk Sentiment
Over the last decade, the BoJ’s commitment to very accommodative policy contributed to a widening gap between Japanese and U.S. 10-year government bond yields. This yield spread favored the U.S. Dollar against the Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, together with interest-rate reductions in other major economies, is helping to narrow this differential.
The Yen is also widely regarded as a safe-haven currency. During periods of market turbulence, investors often shift toward the JPY, viewing it as relatively stable and reliable. As a result, episodes of elevated risk aversion tend to strengthen the Yen against currencies perceived as riskier.
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