The AUD/JPY currency pair continues to attract attention as it navigates a constructive trend in the wake of recent market volatility. After retreating slightly to 106.10 during Friday’s early Asian session, the pair maintained its bullish momentum, supported by a combination of technical strength and macroeconomic factors. The FlexFlume team provides a comprehensive and well-organized overview of the matter.
Japanese Finance Minister Satsuki Katayama has signaled that all options, including direct currency intervention, remain on the table to stabilize the JPY, while expectations of fiscal expansion under Prime Minister Sanae Takaichi could favor further AUD gains. This backdrop sets the stage for a careful assessment of key resistance and support levels, with the first upside barrier for the cross emerging near 106.50.
AUD/JPY Softens Amid Yen Strength
The AUD/JPY cross has pulled back to approximately 106.10 during the early Asian session on Friday, reflecting a modest softening after recent gains. The Japanese Yen (JPY) has strengthened against the Australian Dollar (AUD) amid concerns over potential currency intervention from Japanese authorities.
Market participants are closely monitoring comments from Japanese Finance Minister Satsuki Katayama, who reiterated on Friday that all options, including direct intervention, remain on the table to address recent JPY weakness. Her statement has reinforced cautious positioning in the AUD/JPY, as traders weigh the possibility of official market action to stabilize the Yen.
Despite the temporary pullback, the broader bullish tone for the pair remains intact. Investors continue to price in a potential tailwind for the AUD if fiscal expansionist policies gain momentum in Japan under the leadership of Prime Minister Sanae Takaichi. Takaichi’s plan to dissolve parliament next week and call a snap election could provide her with additional authority to implement stimulative measures, which might weigh on the JPY and favor AUD/JPY gains.
Technical Analysis: Bullish Trend Holds
From a technical perspective, AUD/JPY remains in a constructive phase. On the daily chart, the cross continues to trade well above the rising 100-day EMA at 101.52, reinforcing the broader bullish trend. This moving average has consistently supported dips, suggesting that buyers remain active on pullbacks.
The pair currently hovers between the upper Bollinger Band at 106.52 and the middle band at 105.21, indicating strong buying interest near recent highs. The Bollinger Bands have widened over the past sessions, highlighting elevated momentum and suggesting that the market is poised for potential follow-through gains.
The Relative Strength Index (RSI 14) prints 66, signaling strong momentum while remaining below overbought territory. This reading supports the case for continued upside potential, particularly on a break above the upper Bollinger Band.
Resistance and Support Levels
The first significant upside barrier for AUD/JPY is at 106.50–106.52, closely aligned with the upper Bollinger Band. A daily close above this level could pave the way for further gains, potentially targeting 106.80 or higher. Conversely, failure to breach this resistance could see the cross consolidate within the support range between 105.21 and 103.90, which aligns with the middle Bollinger Band and the rising 100-day EMA.
Traders should also monitor short-term oscillators and momentum indicators for clues of overextension. As long as the 100-day EMA maintains its upward slope, the technical backdrop favors dip-buying opportunities. Pullbacks toward 105.50–105.20 could present attractive entry points for traders looking to capitalize on the constructive trend.
Macroeconomic and Policy Drivers
The AUD/JPY cross remains highly sensitive to policy cues from Japan and risk sentiment in global markets. Key drivers include Japanese fiscal policy, as PM Takaichi’s planned snap election could create room for more expansionary measures, potentially weakening the JPY and supporting AUD/JPY.
Currency intervention risks are also notable, with Finance Minister Katayama’s comments suggesting that official intervention remains possible, which could temporarily strengthen the Yen and cap near-term gains.
Additionally, global risk appetite plays a role: the Australian Dollar tends to benefit from risk-on environments, whereas the JPY is viewed as a safe-haven currency, making the pair sensitive to equity market movements, commodity prices, and geopolitical developments.
Trading Outlook
The constructive outlook for AUD/JPY remains intact, despite the short-term pullback to 106.10. Key technical levels to watch include resistance at 106.50–106.52, aligned with the upper Bollinger Band, and support in the range of 105.21–103.90, which coincides with the middle Bollinger Band and the 100-day EMA. These levels will be crucial in determining the next direction of the pair.
Traders may consider buying on dips within this range, keeping stops below key support levels to manage risk. A break above 106.52 could trigger further upside momentum, while a failure to breach resistance may result in sideways consolidation.
