AUD/JPY Price Forecast: Edges lower to near 110.50, sustains modestly bearish outlook

AUD/JPY faces some selling pressure near 110.60 in Thursday’s early European session.
The cross keeps a bearish vibe, but further consolidation cannot be ruled out with neutral RSI momentum.
The first upside barrier emerges at 111.15; the initial contention level to watch is 110.20.

The AUD/JPY cross trades in negative territory around 110.60 during the early European trading hours on Thursday. Hawkish remarks from Japanese authorities provide some support to the Japanese Yen (JPY) against the Australian Dollar (AUD).

Bank of Japan (BoJ) Deputy Governor Ryozo Himino said on Wednesday that underlying inflation is moving securely toward the central bank’s 2% target. Earlier on Monday, BoJ Governor Kazuo Ueda stated that underlying inflation is near the 2% target. He further stated that if the bank raises the short-term policy rate, long-term interest rates are likely to rise steadily with policy.

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Reserve Bank of Australia (RBA) monetary policy board member Andrew Hauser said on Wednesday that the inflation outlook is materially worse than the bank had forecast. The odds of an interest rate increase in the November policy meeting climbed from 30% before Hauser’s comments to 45%, according to the Guardian.

Japan export momentum extends despite softer-than-expected gains

Analysts at Deutsche Bank note that early data for September showed a further solid performance from Japan’s external sector, with exports rising by “+16.7% in September compared to the same month last year,” supported by “robust demand for semiconductors and AI-related products that continued to support growth.” They highlight that this “marked the 13th consecutive month of gains following a 9.3% rise in August,” even though the latest print fell short of “expectation of a +21.3% increase.” On the import side, Deutsche Bank points out that “imports rose by +18.9% y/y, falling short of the forecast of a +20.4% increase,” and that this softer outcome helped narrow the external shortfall, with “a decrease in imports” contributing to a reduction in Japan’s trade deficit “to -536.6 billion yen in September from -1.11 trillion yen in the previous month.”

Technical Analysis: AUD/JPY holds a modestly bearish outlook below the 100-day SMA

In the daily chart, AUD/JPY keeps a modestly bearish bias, holding below the longer-term 100-day simple moving average (SMA) while trading above the 20-day Bollinger SMA, suggesting a capped recovery within a broader corrective context. The Relative Strength Index (RSI) hovers around 50, hinting at neutral momentum and reinforcing the view of consolidation rather than a decisive bullish reversal as long as overhead resistance remains intact.

On the topside, initial resistance level emerges at the upper Bollinger band around 111.15, en route to a stronger barrier at the 100-day SMA near 112.10. A desicive break above this level could see a rally to the June 16 high of 113.55 and then the July 27 high of 114.67.

On the downside, immediate support level is seen at the 20-day Bollinger midline around 110.20, followed by the 110.00 psychological level. Further south, the next contention level to watch is the lower limit of Bollinger band near 109.20, where a break lower would reopen the door to deeper losses.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Japanese Yen FAQs

What key factors drive 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.

How do the decisions of the Bank of Japan impact the Japanese Yen?

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.

How does the differential between Japanese and US bond yields impact the Japanese 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.

How does broader risk sentiment impact the Japanese Yen?

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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