AUD/JPY Price Forecast: Softens below 111.00, bearish vibe prevails below 100-day SMA
- AUD/JPY weakens to around 110.75 in Thursday’s early European session.
- BoJ’s Masu warned of price risks that may trigger rapid rate hikes.
- The cross keeps a bearish vibe below the 100-day SMA amid an oversold RSI.
- The first upside barrier emerges at 111.63; the initial support level to watch is 110.60.
The AUD/JPY cross loses momentum to near 110.75 during the early European session on Thursday. The Japanese Yen (JPY) strengthens against the Australian Dollar (AUD) amid rising expectations of a near-term interest rate hike by the Bank of Japan (BoJ).
According to a Reuters poll, the BoJ is likely to hike interest rates to 1.25% at its September policy meeting and then to 1.75% in the second quarter (Q2) of 2027, earlier than previously thought.
BoJ board member Kazuyuki Masu said on Thursday that the central bank may eventually be forced to raise interest rates rapidly if inflation accelerates, given the country's loose financial conditions.
Last week, BoJ board member Hajime Takata stated that the central bank could take a more aggressive approach than expected. Takata further stated that a 25-basis-point hike “is not necessarily set in stone,” and that generally speaking, back-to-back rate hikes would be a possibility, too.
BoJ urged to avoid fresh surprises after July carry shock
DBS Group Research stresses that the BoJ must tread carefully at its upcoming meeting, warning that policymakers should remain “mindful of the market impact of large policy surprises,” especially after the “unexpected rate hike in July 2024 triggered a massive JPY carry-trade unwinding and jitters across global financial markets.” The bank cautions that “the risk of carry-trade unwinding and excessive market volatility should not be underestimated if the BoJ were to surprise markets this time,” underscoring the importance of a well-telegraphed and measured policy move.
Technical Analysis: AUD/JPY remains capped under the 100-day SMA
In the daily chart, AUD/JPY extends a corrective phase below the clustered resistance of the 100-day Moving Average (MA) and the Bollinger Bands’ 20-period simple moving average (SMA). This positioning keeps the near-term bias bearish, with price holding closer to the lower Bollinger band, while the Relative Strength Index (14) hovering around 33 suggests weak, oversold-leaning momentum that so far fails to trigger a meaningful rebound.
On the topside, initial resistance is seen at the August 10 low of 111.63, en route to the August 20 low of 112.52. The critical hurdle is located at 113.10, representing the 100-day MA and the Bollinger midline. The upper Bollinger band near 115.60 acting as a more distant cap.
On the downside, the lower Bollinger band at 110.60 offers the first notable support. A sustained break beneath this level would expose the 110.00 psychological level, followed by August 3 low of 109.24.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Japanese Yen FAQs
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.
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.