During early trading in Europe on Thursday, the AUD/JPY cross was noted at approximately 113.45, showing a downward trend. Verbal comments from Japanese officials are expected to lend some support to the Japanese yen (JPY) against the Australian dollar (AUD).
Japan’s Finance Minister Satsuki Katayama mentioned on Thursday that authorities are prepared to implement necessary actions regarding the currency at any time. He emphasized the importance of keeping an eye on market trends and economic indicators to maintain fiscal stability.
Officials from the Bank of Japan (BOJ) indicated that any delays in adjusting stimulus measures might trigger an economic slowdown, particularly given the high inflation risks. Interestingly, a Reuters survey conducted earlier on Thursday revealed that nearly half of Japanese businesses are facing negative impacts on their operations due to the BOJ’s interest rate hikes, primarily from increased borrowing costs that threaten profits and investment.
Technical analysis:
Looking at the daily chart, the AUD/JPY pair maintains a short-term bullish outlook, staying above the 100-day simple moving average (SMA) and the 20-period middle band of the Bollinger Bands. This suggests that the upward trend remains intact, despite recent consolidation. The latest Relative Strength Index (14) sits around 57, indicating that market momentum still leans positively, as long as the pair remains well above the lower Bollinger Band at 111.10.
Resistance appears first near the upper Bollinger Band at 113.70; a persistent break here could lead to a rise towards the May 13 high of 114.74.
Conversely, initial support is identified at the 100-day SMA around 112.65, followed closely by the Bollinger Middle Band near 112.40. However, a more substantial decline toward the lower band at 111.10 would be essential to challenge the current bullish outlook significantly.
Frequently asked questions about the Japanese Yen
The Japanese Yen (JPY) is one of the most actively traded currencies globally. Its value is influenced by Japan’s economic conditions, as well as factors like the Bank of Japan’s policies and differences in yields between Japanese and U.S. bonds.
Exchange control is a key mission for the Bank of Japan, making its trends significant for the yen. The BOJ occasionally intervenes directly in currency markets, primarily to devalue the yen, although this is not common due to political implications with major trading partners. The period of ultra-easy policy from 2013 to 2024 led to a larger policy gap between the BOJ and other central banks, causing the yen to weaken. Recently, this easing has somewhat benefited the yen.
Over the past ten years, the BOJ’s commitment to ultra-easy monetary policy has really set it apart from other central banks, especially the U.S. Federal Reserve. This divergence has led to a widening gap in bond yields that favors the U.S. dollar against the yen. However, with the BOJ’s gradual shift away from this policy starting in 2024, and cuts from other major central banks, this gap appears to be narrowing.
Typically, the Japanese yen is viewed as a safe-haven asset. This means that during times of market stress, investors tend to flock to the yen, viewing it as a stable and reliable currency. As such, during turbulent periods, the yen is expected to increase in value relative to riskier investments.
