- AUD/JPY climbed to about 95.45 in the early European hours on Friday, marking a daily increase of 0.24%.
- The optimistic outlook for this currency pair has outstripped the 100-day EMA, but it’s still possible to see some short-term fluctuations.
- Resistance levels are identified in the 96.00-96.10 range, while initial support is placed at 95.10.
The AUD/JPY pair looks set to draw some buyers around 95.45 as the European session unfolds on Friday. There’s a fair bit of uncertainty regarding the potential for the Bank of Japan (BOJ) to implement another interest rate hike, which continues to put downward pressure on the Japanese yen (JPY), thereby providing some support for the AUD/JPY cross.
From a technical perspective, AUD/JPY maintains an upward trend if it surpasses the 100-day exponential moving average (EMA) on the daily chart. Yet, we shouldn’t disregard the possibility of some short-term pauses, especially since the 14-day relative strength index (RSI) hovers near the midpoint, which indicates a somewhat neutral state.
The immediate upward target for this currency pair is the psychological level between 96.00 and 96.10—essentially matching the highs reached on August 19th. If upward momentum continues, we might see targets extending toward 96.75, which was the peak on August 13th.
On the flip side, if the price breaks below the 100-day EMA of 95.10, it could lead to a decline toward 94.40, the lowest point recorded on August 20th. Sustained trading below these figures might even push prices down to 93.97, marking the lowest level from July 1st.
AUD/JPY Daily Chart
Japanese Yen Questions
The Japanese Yen (JPY) stands as one of the most actively traded currencies globally. Its value is largely steered by the state of the Japanese economy, closely tied to the Bank of Japan’s policies and disparities in bond yields between Japan and the US, alongside the general sentiment among traders.
One key responsibility of the Bank of Japan is managing the currency, which plays a crucial role in the yen’s fluctuations. While the BOJ has typically intervened directly in currency markets to lower yen value, it often holds back due to political pressure from major trading partners. The period of ultra-loose monetary policy from 2013 to 2024 intensified policy disparities between the BOJ and other major central banks, leading to the depreciation of the yen. Recently, however, the yen has seen some support amid a pivot away from this ultra-loose stance.
Over the last decade, the BOJ’s commitment to maintaining an ultra-loose monetary policy has widened its policy gap with other central banks, particularly the US Federal Reserve. This has exacerbated the divergence in bond yields, which in turn has influenced the strength of the US dollar against the yen. The BOJ’s 2024 decisions, combined with interest rate cuts from other central banks, are beginning to close this gap.
The Japanese yen is frequently viewed as a safe haven asset. In times of market volatility, investors are likely to flock to the yen due to its perceived stability and reliability. As a result, periods of turbulence can often bolster the yen’s value against currencies considered riskier for investment.
