AUD/JPY Price Forecast: Losses deepen below 109.00 as bearish bias holds under 100-day SMA

Selling pressure drags AUD/JPY towards 108.90 as European trading gets under way on Friday.
Below the 100-day SMA, the cross retains a bearish bias, reinforced by negative RSI momentum.
While 108.64 provides initial support, the first hurdle on the upside stands at 109.15.

Safe-haven demand and signals of further Bank of Japan (BoJ) rate hikes lift the Japanese Yen (JPY) against the Australian Dollar (AUD), leaving AUD/JPY under pressure. The cross trades around 108.90 in negative territory during Friday’s early European session.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Global financial markets have been rattled this week by concerns over closer scrutiny of the Artificial Intelligence (AI) industry, especially data centre construction. As investors seek safety, demand for the JPY weighs on the cross.

Further support for the JPY could come from the hawkish tone of the BoJ minutes. Released on Thursday, the record of September’s meeting showed that most BoJ policymakers considered additional interest rate increases appropriate as underlying inflation moved towards the central bank’s 2% target.

As the central bank evaluated developments in the Middle East, rising demand associated with Artificial Intelligence (AI) and Foreign Exchange (FX) movements, one board member suggested there might be scope to raise interest rates more quickly.

Do BoJ minutes strengthen the case for gradual tightening?

Turning to central bank developments, Deutsche Bank analysts say the minutes of the BoJ’s September meeting "reinforced the case for further policy tightening." In their reading, policymakers "generally agreed that interest rates should continue to rise," while one member was "highlighting the possibility of a faster pace of hikes." Deutsche Bank also draws attention to another policymaker who "noted that while there was no need for immediate action, the BoJ should continue to calibrate policy carefully to prevent excessive and persistent inflationary pressures," signalling that the committee remains cautious but firmly inclined towards tighter policy.

Technical Outlook: Can AUD/JPY shake off its bearish bias below the 100-day SMA?

On the daily chart, a bearish near-term bias persists in AUD/JPY, with spot firmly held below both the Bollinger Bands’ 20-day simple moving average (SMA) and the 100-day SMA. The price is testing the bottom of its recent range, while the lower Bollinger band provides immediate overhead supply. At 36.91, the Relative Strength Index (RSI) sits just above oversold territory, suggesting continued downward pressure rather than a bullish reversal in the immediate term.

Any recovery would first face resistance at 109.15, the lower Bollinger band, before reaching the psychological 110.00 mark and the 20-day SMA near 110.40. Selling interest could intensify around the latter level. If the cross sustains trading above it, the next upside levels would be the upper Bollinger band at 111.65 and the 100-day SMA at 111.80.

For a decline, initial support lies at 108.64, the low recorded on 15 October. A break beneath that level would bring the 13 February low of 107.70 back into view, ahead of the 26 January low of 106.08.

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

Japanese Yen: Frequently asked questions

Which factors are most important for the Japanese Yen?

Among the world’s most actively traded currencies, the Japanese Yen (JPY) takes its broad direction from Japan’s economic performance. More specific influences include Bank of Japan policy, the gap between Japanese and US bond yields, and traders’ appetite for risk, alongside other factors.

Why do Bank of Japan decisions matter for the Japanese Yen?

Currency control forms part of the Bank of Japan’s mandate, making its actions an important influence on the Yen. On occasion, the BoJ has intervened directly in currency markets, usually to weaken the Yen. However, political concerns among Japan’s main trading partners discourage frequent intervention. Between 2013 and 2024, the BoJ’s ultra-loose monetary policy weakened the Yen against its major currency peers as the policy gap between the Bank of Japan and other leading central banks widened. The more recent, gradual withdrawal of this ultra-loose stance has offered the Yen some support.

Why does the Japanese-US bond yield gap influence the Japanese Yen?

By maintaining ultra-loose monetary policy over the past decade, the BoJ moved increasingly out of step with other central banks, notably the US Federal Reserve. That divergence helped widen the yield gap between 10-year US and Japanese bonds, benefiting the US Dollar relative to the Japanese Yen. The gap is now narrowing following the BoJ’s 2024 decision to phase out its ultra-loose policy and interest rate cuts by other major central banks.

Why does the Japanese Yen respond to shifts in risk sentiment?

Investors often regard the Japanese Yen as a safe-haven asset. During periods of market stress, its perceived reliability and stability make them more inclined to move money into the Japanese currency. As a result, turbulence is likely to lift the Yen against currencies viewed as riskier investments.