• AUD/JPY gains traction to near 110.90 in Thursday’s early European session.
• The cross retains a negative tone below the 100-day SMA, with bearish RSI momentum.
• The first upside barrier is seen at 111.63; the initial support level to watch is 100.00.

The AUD/JPY cross trades in positive territory around 110.90 during the early European session on Thursday. Elevated energy prices due to the ongoing conflict in the Middle East weigh on the Japanese Yen (JPY) against the Australian Dollar (AUD) as Japan is an oil-dependent economy. All eyes will be on the Bank of Japan (BoJ) monetary policy meeting on Friday.

The BoJ is likely to raise the interest rate to 1.25% from 1.0% at the September policy meeting on Friday. Traders await the speech from BoJ Governor Kazuo Ueda, which could offer some htins about the timing and pace of further hikes.

"Markets are divided between those who see hawkish BOJ communication as helping lower bond yields by alleviating concern it is behind the curve on inflation, and others who see it as lifting yields by moving up terminal-rate bets," said Katsutoshi Inadome, senior strategist at Sumitomo Mitsui Trust Asset Management.

BoJ seen hiking again as Japan data show capacity to absorb modest tightening

Analysts at Standard Chartered expect the BoJ to “raise the policy rate by 25bps to 1.25% at its 17-18 September meeting, while avoiding an overly hawkish message.” They argue that the macro backdrop gives the central bank room to move, noting that “the economy appears able to absorb another modest hike: Q2 GDP growth was revised up, exports remain robust, investment indicators are resilient, and real wages are rising.”

Technical Analysis: AUD/JPY maintains a bearish outlook under the 100-day SMA

In the daily chart, AUD/JPY keeps a bearish near-term bias as spot remains under the 20-day Bollinger simple moving average and the 100-day moving average. Price is closer to the lower Bollinger band than to the upper band, while the Relative Strength Index (14) at 38.58 stays below the neutral 50 line, suggesting persistent downside pressure rather than an immediate oversold rebound.

On the topside, the immediate resistance level emerges at the August 10 low of 111.63. Further north, the next hurdle to watch is the 20-day Bollinger middle band near 112.45, en route to the 100-day moving average around 112.90, with a more distant cap at the upper Bollinger band near 115.85.

On the downside, the key support level is locate at the 100.00 psychological level. A decisive break below this level could pave the way to the lower Bollinger band at 109.05. Any follow-through selling beneath this level would open the way for the March 31 low of 108.79, and the February 16 low of 107.73.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Japanese Yen FAQs

The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.

One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.

Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.

The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.