AUD/JPY Price Forecast: Weakens to near 110.50, maintaining negative bias under 100-day SMA
- AUD/JPY softens to near 110.50 in Monday’s early European session.
- The cross keeps a negative bias below the 100-day SMA, with bearish RSI momentum.
- The first upside barrier emerges at 110.60; the initial support level to watch is 110.00.
The AUD/JPY cross trades in negative territory around 110.50 during the early European trading hours on Monday. The Japanese Yen (JPY) strengthens against the Australian Dollar (AUD), with trading activity expected to remain subdued due to a national holiday in Japan. Traders remain on high alert for currency intervention from Japanese authorities to proop up the JPY.
Meanwhile, uncertainty persisted over whether the Bank of Japan (BoJ) would raise interest rates again this month, although markets continued to anticipate a possible move in December or January.
Bank of Japan (BoJ) Governor Kazuo Ueda last week said that the central bank would "assess the likelihood and risks of the baseline economic and price outlook being realized" when considering the pace and timing of future rate increases. BoJ Ayano Sato stated that she supported a gradual approach to raising interest rates in multiple stages.
Japanese bond outflows reshape global yield dynamics and subtly aid the Euro
Strategists at Commerzbank highlight a notable shift in Japan’s role within global fixed income markets, pointing out that “over the past twelve months, Japanese investors have sold JPY 5tn (around EUR 30bn) more in foreign bonds than they have purchased.” They stress that such sustained net selling is rare, noting that “over the past 20 years, there have been only three episodes in which Japanese investors were significant net sellers of foreign bonds on a rolling 12-month basis: in 2013-14, in the aftermath of the pandemic in 2022-23, and over the past three months.”
Against the backdrop of recent volatility in European rates, Commerzbank acknowledges that “Japanese investors have indeed been net sellers of long-term French bonds over the past twelve months, and cumulative net purchases since early 2014 have declined noticeably since the pandemic,” but emphasises that “they have already returned as buyers over the past three months.” On this basis, the bank argues that “it therefore appears unlikely that Japanese investors were responsible for, or even materially contributed to, the recent dislocations in the French bond market.”
More broadly, Commerzbank cautions that “indirectly, however, it clearly matters for global bond markets whether Japanese investors are reliable buyers of foreign bonds month after month or whether, as has been the case over the past twelve months, they turn into net sellers,” adding that “there is likely a connection between the rise in global yields and the growing reluctance of Japanese investors to allocate money abroad.” The composition of those flows is also important: “interestingly, however, Japanese investors have primarily been selling US bonds in recent months. From that perspective, Japanese bond flows have recently provided some support to the euro relative to the US dollar.”
BoJ’s Sato backs gradual tightening but rejects preset rate path
Sato’s 6.4/10 score matches the historic average on FXS Speechtracker, signaling no clear hawkish or dovish shift versus usual communication. Endorsing gradual interest rate adjustment while refusing a preset hiking path points to cautious normalization that limits immediate upside for the Yen.
The emphasis on policy independence alongside alignment with proactive fiscal support suggests scope for steady, data-dependent tightening rather than aggressive moves. Noting that price risks tilt slightly higher on rising oil costs from the Middle East conflict adds a mild hawkish bias at the margin, which could underpin the Yen on dips if incoming data confirm persistent inflation pressures.
Technical Analysis: Negative outlook for AUD/JPY remains intact below the 100-day SMA
In the daily chart, AUD/JPY keeps a bearish near-term bias as spot holds beneath the Bollinger middle band and well under the 100-day Simple Moving Average (SMA). The pair is pinned in the lower half of the recent Bollinger envelope, while the 14-period Relative Strength Index (RSI) around 46 stays below the neutral 50 line, hinting that downside pressure still dominates despite the lack of oversold extremes.
On the topside, initial resistance level is located at the Bollinger middle band / 20-period SMA near 110.60. Further north, the next hurdle to watch is the August 10 low of 111.63, en route to the upper boundary of Bollinger band at 112.10, and then the 100-day SMA at 112.40.
On the downside, the next notable technical floor emerges at the 110.00 psychological level. Any follow-through selling below this level could expose the lower limit of the Bollinger band around 109.05, followed by the October 1 low of 108.71, where a break would reopen scope for a deeper slide.
(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.