The AUD/JPY cross slumps to around 99.55 during the early European session on Tuesday. The Japanese Yen (JPY) edges higher against the Australian Dollar (AUD) after US President Donald Trump and Japan’s Prime Minister Sanae Takaichi on Tuesday signed a framework for securing the supply of critical minerals and rare earths.
The Australian Consumer Price Index (CPI) inflation data will be released later on Wednesday. All eyes will be on the Bank of Japan (BoJ) interest rate decision on Thursday. The BoJ is broadly expected to hold its interest rate steady at 0.5% at its upcoming policy meeting. Traders will closely monitor the guidance from BoJ Governor Kazuo Ueda following the meeting for fresh impetus.
Technically, the constructive view of AUD/JPY remains in place as the cross is well-supported above the key 100-day Exponential Moving Average (EMA) on the daily chart. The upward momentum is supported by the 14-day Relative Strength Index (RSI), which stands above the midline near 57.50. This suggests bullish momentum in the near term.
On the bright side, the key resistance level for the cross emerges at the 100.00 psychological level. Any follow-through buying above this level could aim for the upper boundary of the Bollinger Band of 100.90 and possibly retest the high of November 8, 2024, at 102.30.
On the downside, the initial support level for AUD/JPY is located at 98.54, the low of October 23. More bearish candlesticks below the mentioned level could pull the cross back toward 97.25, the low of October 16. The crucial contention level to watch is 96.90, the 100-day EMA.
AUD/JPY daily chart
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.
