The AUD/JPY cross gathers strength near 113.30 during the early European session on Thursday. The Australian Dollar (AUD) edges higher against the Japanese Yen (JPY) on improved risk sentiment following reports that the United States (US) and Iran are close to a deal to end the war.
An Iranian official said on Wednesday that it was reviewing a US peace proposal that sources said would formally end the war while leaving unresolved the critical US demands that Iran suspend its nuclear program and reopen the Strait of Hormuz. CNN reported that Iran is expected to hand over its reply on Thursday to mediators about the US proposal to end the war.
However, the potential upside for the cross might be limited due to intervention fears. Market volatility has been high following suspected interventions by Japanese authorities to strengthen the JPY. Japan’s top foreign exchange official, Atsushi Mimura stated on Thursday that he will closely monitor the foreign exchange (FX) markets. Mimura also declined to comment on FX intervention and specific currency levels.
Technical Analysis:
In the daily chart, AUD/JPY holds a constructive bullish bias as it sits above the 100-day Exponential Moving Average (EMA), keeping the broader uptrend intact. The Relative Strength Index (14) around 53 suggests moderate, non-stretched momentum, hinting that bulls still retain control but lack a strong overbought impulse for an immediate breakout.
On the topside, initial resistance is aligned at the Bollinger 20-day middle band near 113.60. The next upside barrier emerges at the May 6 high of 114.32, with the upper band coming in higher at 114.82 as the next hurdle if buyers extend the advance. On the downside, first support is seen at the lower Bollinger band at 112.40, ahead of the April 30 low of 111.33. The key contention level is seen at the 100-day EMA of 109.60, where a deeper pullback would be expected to attract dip-buying interest while the broader bullish structure persists.
(The technical analysis of this story was written with the help of an AI tool.)
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.
Be the first to comment