AUD/JPY Price Forecast: Strengthens above 114.50 as bullish technical setup holds
- AUD/JPY gathers strength to around 114.60 in Tuesday’s early European session.
- The cross maintains a constructive tone above the 100-day SMA, with bullish RSI momentum.
- The first upside barrier emerges at 114.96; the initial support level is seen in the 113.25-113.20 region.
The AUD/JPY cross trades in a positive territory near 114.60 during the early European session on Tuesday. Stronger-than-expected Chinese economic data provides some support to the China-proxy Australian Dollar (AUD) against the Japanese Yen (JPY).
Data released by RatingDog on Tuesday showed that China’s Manufacturing Purchasing Managers' Index (PMI) jumped to 51.5 in August from 50.9 in July. This figure came in above the market consensus of 50.9.
On Japan’s front, markets are now pricing in nearly a 73% probability of a hike from the Bank of Japan (BoJ) later this month, but analysts suggest there needs to be a much stronger follow-through by the central bank.
"For the yen, a September BOJ hike is already heavily anticipated," said Charu Chanana, chief investment strategist at Saxo.
Yen support tempered as BoJ struggles to out-hawk market pricing
OCBC FX strategists Sim Moh Siong and Christopher Wong note that the Japanese Yen has already drawn substantial support from “aggressive market pricing for Bank of Japan (BoJ) tightening,” with an implied “85% chance of a September hike.” They point out that “a September move would break from the BoJ's pattern in the current tightening cycle, where rate increases have typically come about every six months,” given that “the last hike was delivered in June.” However, they caution that “it will be difficult for the BoJ to out-hawk market expectations,” arguing that further JPY gains may increasingly depend on additional policy tools beyond rate increases, including measures to encourage repatriation of overseas assets, as the BoJ faces constraints on how far and how fast it can raise rates.
Technical Analysis: AUD/JPY
In the daily chart, AUD/JPY maintains a bullish near-term bias as price holds firmly above the 100-day moving average (MA) and the Bollinger Bands’ 20-period simple moving average, suggesting underlying demand after the recent advance. The Relative Strength Index (14) at 63.92 leans toward bullish momentum without yet signaling extreme overbought conditions, hinting that upside pressure could persist while these supports remain intact.
On the topside, immediate resistance emerges at the August 28 high of 114.96. The next hurdle is seen at the Bollinger upper band near 115.30, where buying interest could start to fade and encourage consolidation.
On the downside, critical support level is located in the 113.25-113.20 zone, creating a tight demand zone. The next contention level to watch is the August 20 low of 112.52. A deeper pullback would expose the lower Bollinger band around 111.05.
(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.
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