AUD/JPY Holds Gains Above Key Technical Support

Key Moments

Spot Market Overview

AUD/JPY softened to roughly 113.45 during Thursday’s early European session, trading in negative territory while still preserving an overall constructive setup. The cross retreated modestly even as underlying momentum remained supported by a bullish Relative Strength Index (RSI) profile, with immediate resistance identified at 113.70 and first support at 112.65.

Verbal intervention from Japanese authorities lent some support to the Japanese Yen (JPY) against the Australian Dollar (AUD). Market participants monitored official comments closely for any further clues on potential policy responses and their implications for currency markets.

Comments from Japanese Authorities and Policy Backdrop

Japan’s Finance Minister Satsuki Katayama stated on Thursday that authorities are prepared to take appropriate action on the currency at any time if needed. She also indicated that officials will monitor market behavior and economic indicators with the aim of maintaining fiscal sustainability.

Senior Bank of Japan (BoJ) officials noted that postponing adjustments to stimulus in an environment of elevated inflation risk could lead to an economic downturn. At the same time, a Reuters survey released earlier on Thursday showed that nearly half of Japanese companies are experiencing negative business consequences from the BoJ’s interest rate hikes, with higher borrowing costs weighing on profitability and deterring capital spending.

Technical Picture: Trend, Momentum, and Key Levels

On the daily chart, AUD/JPY maintains a bullish near-term bias, as price action remains above both the 100-day Simple Moving Average (SMA) and the 20-period middle band of the Bollinger Bands. This positioning suggests that the broader upward trend continues to be supported despite recent consolidation phases.

The latest 14-period RSI reading near 57 indicates that momentum stays on the constructive side, implying that buyers retain the upper hand as long as the pair trades comfortably above the lower Bollinger band at 111.10.

On the topside, the initial ceiling emerges near the Bollinger upper band around 113.70. A clear and sustained break above this level would expose the May 13 peak at 114.74.

On the downside, the first notable support is the 100-day SMA at 112.65, followed by the Bollinger middle band around 112.40. A deeper slide toward the lower band at 111.10 would be required to seriously test and potentially undermine the prevailing bullish structure.

Japanese Yen: Background Explanations

The Japanese Yen (JPY) is among the most actively traded currencies globally. Its value is largely influenced by Japan’s economic performance, Bank of Japan policy decisions, the spread between Japanese and U.S. bond yields, and overall risk appetite in financial markets, among other elements.

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.

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.