Near 110.50: AUD/JPY price forecast remains modestly bearish as pair edges lower

110.60 is the level around which AUD/JPY comes under some selling pressure in early European trading on Thursday.
Neutral RSI momentum leaves scope for further consolidation, although the cross retains a bearish bias.
111.15 marks the first resistance level, while initial support stands at 110.20.

110.60 is the approximate level for AUD/JPY in early European trading on Thursday. The cross is trading lower as hawkish comments from Japanese authorities lend some support to the Japanese Yen (JPY) against the Australian Dollar (AUD).

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Underlying inflation is progressing securely towards the central bank’s 2% target, Bank of Japan (BoJ) Deputy Governor Ryozo Himino said on Wednesday. His remarks followed comments on Monday from BoJ Governor Kazuo Ueda, who said underlying inflation was close to the 2% target. Ueda also indicated that, if the bank increases its short-term policy rate, long-term interest rates are likely to rise steadily alongside policy.

The inflation outlook has deteriorated materially relative to the bank’s forecast, Reserve Bank of Australia (RBA) monetary policy board member Andrew Hauser said on Wednesday. According to the Guardian, the probability of a rate increase at the November policy meeting rose to 45% from 30% before his remarks.

Japan’s export growth continues but misses expectations

September’s preliminary figures pointed to continued strength in Japan’s external sector, according to analysts at Deutsche Bank. Exports increased by “+16.7% in September compared to the same month last year,” with support from “robust demand for semiconductors and AI-related products that continued to support growth.” Despite missing the “expectation of a +21.3% increase,” the result “marked the 13th consecutive month of gains following a 9.3% rise in August,” the analysts note. Turning to imports, Deutsche Bank observes that “imports rose by +18.9% y/y, falling short of the forecast of a +20.4% increase,” helping to narrow the external shortfall. The bank adds that “a decrease in imports” contributed to a fall in Japan’s trade deficit “to -536.6 billion yen in September from -1.11 trillion yen in the previous month.”

Technical outlook: 100-day SMA caps AUD/JPY as modest bearish bias persists

Trading below the longer-term 100-day simple moving average (SMA), AUD/JPY retains a modest bearish bias on the daily chart. It remains above the 20-day Bollinger SMA, however, pointing to a recovery that is capped within a broader corrective phase. With the Relative Strength Index (RSI) near 50, momentum is neutral. This favours consolidation over a clear bullish reversal while overhead resistance holds.

111.15, around the upper Bollinger band, provides the first resistance. Beyond it lies a stronger barrier near 112.10 at the 100-day SMA. A decisive move above that level could open the way to the 16 June high of 113.55, followed by the 27 July high of 114.67.

110.20, around the 20-day Bollinger midline, offers immediate support ahead of the psychological 110.00 level. Below that, attention turns to the lower Bollinger band near 109.20. A break beneath it would again leave the cross exposed to deeper losses.

(An AI tool assisted in preparing this article’s technical analysis. Find out more.)

Japanese Yen: frequently asked questions

Which factors influence the Japanese Yen?

Among the world’s most actively traded currencies, the Japanese Yen (JPY) takes its broad direction from Japan’s economic performance. More specific influences include Bank of Japan policy, the gap between Japanese and US bond yields, and traders’ appetite for risk, alongside other factors.

Why do Bank of Japan decisions matter for the Japanese Yen?

Currency control forms part of the Bank of Japan’s mandate, making its actions an important influence on the Yen. Direct intervention in foreign exchange markets has occurred at times, usually to weaken the currency. Such action is infrequent, however, because of political concerns among Japan’s main trading partners. Between 2013 and 2024, the BoJ’s ultra-loose monetary policy weakened the Yen against its major peers as its policy increasingly diverged from that of other leading central banks. The more recent, gradual withdrawal of this ultra-loose stance has offered the Yen some support.

Why does the Japan-US bond yield gap matter for the Japanese Yen?

By maintaining ultra-loose monetary policy over the past decade, the BoJ moved increasingly out of step with other central banks, notably the US Federal Reserve. That divergence helped widen the yield gap between 10-year US and Japanese bonds, supporting the US Dollar against the Japanese Yen. The gap is now narrowing as the BoJ’s 2024 decision to move gradually away from ultra-loose policy combines with interest-rate cuts by other major central banks.

How does market risk appetite affect the Japanese Yen?

Investors often regard the Japanese Yen as a safe haven. During periods of market stress, its perceived reliability and stability make them more likely to shift funds into the currency. As a result, market turbulence is likely to lift the Yen against currencies viewed as riskier investments.