During the early hours of Friday’s European session, the AUD/JPY pair was holding steady around 113.20. A potential ceasefire involving the United States and Iran seems to have positively influenced market sentiment, thus boosting the Australian dollar against the Japanese yen. President Trump’s administration is reportedly weighing its options in response to Iran’s proposal to reopen the Strait of Hormuz and stop the ongoing conflict.
On another note, worries about potential interventions by Japanese authorities might help to anchor the yen. Reportedly, Japanese officials intervened in the foreign exchange market during early May, following a yen-buying operation that took place on April 30. An insider mentioned that, “the interventions since the start of May coincided with a holiday period when market liquidity was low.”
Technical analysis:
From a daily chart perspective, the AUD/JPY remains comfortably above its 100-day exponential moving average (EMA), indicating a generally positive outlook in the short term. The Bollinger Bands (20) suggest that the price is currently stabilizing in the upper half of the range. The Relative Strength Index (14) hovers around 52, signaling a neutral to slightly positive tone, which implies that any upward pressure has lessened but hasn’t completely reversed.
Looking at resistance levels, the first one appears near the 20-day simple moving average around 113.65, followed closely by the middle Bollinger Band and the recent upper Bollinger Band peak at approximately 114.75. On the downside, initial support is positioned below the Bollinger Band at 112.50. A key psychological level to monitor is 100.00, while a significant support level can be found at the 100-day EMA near 109.65. A decline below this mark could challenge the current upward trajectory.
Frequently asked questions about the Japanese Yen
The Japanese Yen (JPY) is among the most traded currencies globally. Its value is influenced by Japan’s economic trends and, more specifically, factors including the Bank of Japan’s policies, differences in bond yields between Japan and the U.S., and overall risk sentiment among traders.
The Bank of Japan’s role in exchange control makes its trends vital for the yen’s value. Occasionally, it intervenes directly in the currency markets, usually to drive down the yen’s value, but such interventions are rare due to political considerations from major trading partners. The Bank’s prolonged focus on ultra-easy monetary policy from 2013 to 2024 has exacerbated the policy gap between it and other significant central banks, leading to a weakening yen against major currencies. However, a recent gradual tapering of this approach has brought some relief to the yen.
Over the past ten years, the Bank of Japan’s dedication to an ultra-accommodative monetary policy has widened the gap with other central banks, especially the U.S. Federal Reserve. This divergence has been illustrated by the growing discrepancy between U.S. 10-year and Japanese 10-year bond yields, favoring the U.S. dollar against the yen. However, with the Bank of Japan gradually departing from its ultra-low policy in 2024 and the interest rate cuts from other major central banks, this gap is beginning to close.
The Japanese yen often serves as a safe-haven currency. When markets experience stress, investors typically flock to the yen, which is perceived to be stable and reliable. During turbulent times, the yen is likely to appreciate against other riskier currencies.
