The Australian dollar/yen pair has been stuck in a sideways movement, hitting levels not seen since September 1990. This is largely due to the ongoing weakness of the Japanese yen (JPY), which is keeping the exchange rate afloat, while concerns about potential intervention by the Japanese government are capping any significant gains. Currently, the pair sits around 113.00, falling from an intraday high of 113.44.
The yen remains under significant pressure, with USD/JPY trading near 161.50, which is its lowest point since 1986. This development has reignited worries regarding further intervention by Japanese officials, especially after they stepped in earlier this year when the rate surpassed 160.00.
Japan’s Finance Minister, Satsuki Katayama, confirmed on Monday that the government is prepared to act if currency fluctuations become excessive.
In this context, instability in the yen cross market seems likely to persist. Furthermore, the significant interest rate gap between the Bank of Japan (BOJ) and other major central banks continues to weigh down the yen.
Looking ahead, traders are likely to keep an eye on this week’s economic announcements. Key data will include Australia’s Consumer Price Index (CPI), labor market statistics, and inflation figures from Tokyo, which could influence short-term price movements in the AUD/JPY.
Technical analysis:
Examining the daily chart, AUD/JPY is below the 50-day simple moving average (SMA) of 113.63 but remains above the 100-day SMA at 112.16. This indicates a somewhat neutral to bearish outlook in the short term.
While the long-term uptrend signaled by the 200-day SMA near 107.10 is still in play, the negative Moving Average Convergence Divergence (MACD) readings and a Relative Strength Index (RSI) hovering around the mid-40s suggest that the upward momentum is beginning to wane. This also implies that any rally might face challenges as long as prices remain below the 50-day SMA.
On the upside, the initial resistance level is at the 50-day SMA around 113.63. A daily close above this threshold would be necessary to relieve the current correction and potentially pave the way for higher price points. On the downside, near-term support seems to lie at the 100-day SMA near 112.16, with additional support appearing closer to 110.00. If selling pressure continues, a more profound support level exists at the 200-day SMA around 107.10.
