Key Moments
- AUD/JPY trades around 112.75 in early European hours on Tuesday, slipping into negative territory.
- Japanese Yen gains as traders stay alert for possible official FX intervention following comments from Japan’s Chief Cabinet Secretary.
- Technically, AUD/JPY maintains a mildly constructive setup above the 100-day SMA, with resistance near 113.40 and support around 112.20-112.00.
Price Action and Market Drivers
AUD/JPY faces selling pressure near 112.75 in early European trading on Tuesday, with the cross holding modest losses below the 113.00 mark. Despite the pullback, the overall tone remains mildly bullish, though the risk of further consolidation persists as the Relative Strength Index (RSI) stays below its midpoint. The first notable upside hurdle is seen at 113.40, while initial support sits at 112.70.
The pair is trading in negative territory around 112.75 as the Japanese Yen (JPY) strengthens against the Australian Dollar (AUD). Market participants remain wary of potential foreign exchange intervention by Japanese authorities. Japan’s Chief Cabinet Secretary Minoru Kihara said on Tuesday that he will take appropriate action against the foreign exchange moves if needed.
On the Australian side, expectations of a relatively hawkish stance from the Reserve Bank of Australia (RBA) may help underpin the AUD. The RBA kept the Official Cash Rate (OCR) unchanged at 4.35% following its June monetary policy meeting last week. While the central bank paused rate moves, board members indicated that additional rate increases might still be required to meet their objectives.
Technical Outlook for AUD/JPY
From a daily chart perspective, AUD/JPY maintains a mildly constructive bias as long as it trades above the 100-day Simple Moving Average (SMA) and the lower Bollinger Band. This structure indicates that underlying demand persists despite the recent decline from the highs. The RSI stands at 43.6, reflecting a slightly bearish tone without signaling oversold conditions, which points more toward a consolidation phase than a clear trend reversal while price holds within the upper half of the wider Bollinger envelope.
On the upside, initial resistance aligns with the middle Bollinger Band near 113.40. A sustained move above this level would pave the way for a potential test of the upper Bollinger Band around 114.78. On the downside, immediate attention is on the 100-day SMA at 112.20, followed by the lower Bollinger Band at 112.00, an area where buyers would likely become more active if the pullback extends.
| Technical Level | Indicator/Context | Approximate Value |
|---|---|---|
| Current price region | Early European session trading | 112.75 |
| Initial resistance | Middle Bollinger Band | 113.40 |
| Potential upper target | Upper Bollinger Band | 114.78 |
| Initial support | Near-term level to watch | 112.70 |
| Key moving average support | 100-day SMA | 112.20 |
| Lower Bollinger support | Potential demand zone | 112.00 |
| RSI | Daily timeframe | 43.6 |
Japanese Yen: Key Considerations
Core Drivers of the Japanese Yen
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
Bank of Japan Policy and FX Intervention
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ 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 gradually 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 stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
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