The AUD/JPY pair is trading in negative territory near 105.65 during early European trading hours on Monday. The Japanese yen (JPY) rose against the Australian dollar (AUD) as Japanese officials warned against currency intervention.
Japanese Finance Minister Satsuki Katayama said on Friday that she is not ruling out any options to confront the weak Japanese yen, including coordinated intervention with the United States.
On the other hand, political uncertainty due to early election speculation and aggressive fiscal spending plans could add to market uncertainty and weigh on the Japanese yen in the near term. Japanese Prime Minister Sanae Takaishi intends to dissolve parliament next week and call early parliamentary elections as she seeks public support for her spending plans.
Technical analysis:
On the daily chart, AUD/JPY is holding above the bullish 100-day moving average at 101.60, keeping the broader uptrend intact. The upward slope of the average supports buying on pullbacks. The RSI at 59.89 is neutral to bullish, indicating steady momentum. Pullbacks may be mitigated by the 20-day Bollinger Band Average at 105.25, with the trend bias remaining positive although above average.
The price is trading north of the middle band and leaning towards the upper border of the Bollinger Band, highlighting the continued upward pressure. The bands have narrowed, indicating lower volatility and a potential breakout setting. Resistance is located at the upper band at 106.48. A close above the resistance could extend the advance, while a drop below the middle band will open a corrective phase towards the lower band at 104.00.
(The technical analysis for this story was written with the help of an artificial intelligence tool.)
Frequently asked questions about the Japanese Yen
The Japanese Yen (JPY) is one of the most widely traded currencies in the world. Their value is determined broadly by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the spread between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the powers of the Bank of Japan is to control the currency, so its movements are key to the yen. The Bank of Japan has intervened directly in currency markets on occasion, generally to devalue the yen, although it often refrains from doing so due to the political concerns of its major trading partners. The Bank of Japan’s ultra-loose monetary policy between 2013 and 2024 caused the yen to depreciate against its major counterparts due to the growing policy divergence between the Bank of Japan and other major central banks. More recently, the gradual dismantling of this ultra-lenient policy has given the yen some support.
Over the past decade, the Bank of Japan’s ultra-loose monetary policy stance has led to widening policy divergence with other central banks, especially the US Federal Reserve. This supported the widening of the spread between the US and Japanese 10-year bonds, which favored the US dollar against the Japanese yen. The Bank of Japan’s decision in 2024 to gradually abandon ultra-loose policy, along with interest rate cuts at other major central banks, are narrowing this spread.
The Japanese yen is often viewed as a safe investment. This means that in times of market stress, investors are more likely to put their money into the Japanese currency because of its supposed reliability and stability. Turbulent times are likely to strengthen the value of the yen against other currencies that are considered riskier to invest in.
