AUD/JPY Price Forecast: Edges higher above 113.00, bullish bias prevails above 100-day SMA
- AUD/JPY gathers strength to around 113.00 in Monday’s early European session.
- Japan's economy expanded annually by 1.1% in Q2, weaker than expected.
- The cross holds a constructive bullish bias while holding above the 100-day SMA.
- The first downside target emerges at 112.21; the immediate resistance level is seen at 113.88.
The AUD/JPY cross trades in positive territory near 113.00 during the early European session on Monday. The Japanese Yen (JPY) softens against the Australian Dollar (AUD) amid weaker-than-expected Japanese Gross Domestic Product (GDP) data.
Japanese GDP for the second quarter (Q2) expanded at an annualised 1.1%, according to the Cabinet Office on Monday. This figure came in below the market consensus of 2.0% and the first quarter’s reading of 1.8% growth, compared to a 0.5% growth recorded in Q1 and missed market expectations of a 0.5% expansion.
"The details were a mixed bag," Capital Economics analysts wrote in a research note. "GDP expanded at a decent pace in Q2, and with the government still limiting the pass-through from higher energy prices," they wrote, while a jump in government consumption "suggests that Takaichi’s expansionary fiscal policies are starting to have an impact."
Traders await the release of the Australian July employment report on Thursday ahead of Japan’s National Consumer Price Index (CPI) inflation data. Economists expect the Unemployment Rate in Australia to rise to 4.5% in July from 4.4% in June. If the report shows a stronger-than-expected outcome, this could lift the Aussie against the JPY.
Japan data in focus as Deutsche Bank flags solid Q2 growth and firmer inflation
Economists at Deutsche Bank highlight a busy week for Japan, with “key economic data” due including Q2 GDP on Monday and the national CPI on Friday. For GDP, the bank notes that its Chief Japan Economist expects “real GDP to grow at +1.6% QoQ,” while on prices he “forecasts core CPI ex. fresh food to rise to 1.8% YoY from 1.6% in June and core-core inflation ex. fresh food and energy to increase to 1.8% (1.7%).” The bank directs clients to “see more in his full week-ahead” for additional detail.
Technical Analysis: AUD/JPY keeps a mildly positive momentum tone in the near term
In the daily chart, AUD/JPY holds a constructive bullish bias as it sits above the Bollinger middle band and the 100-day simple moving average. The clustering of these supports just beneath spot suggests dips are being absorbed, while the 14-day Relative Strength Index around 54 keeps a mildly positive momentum tone without yet signalling overbought conditions.
On the downside, initial support is seen at the July 8 low of 112.21, followed by the August 10 low of 111.63. The next contention level is seen at the lower Bollinger band near 110.00, which acting as a deeper bearish target if selling accelerates.
On the topside, the immediate resistance to watch is the July 16 high of 113.88, en route to the July 27 high of 114.67. A clear break would open the door to the upper Bollinger band at 115.35.
(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.