The AUD/JPY cross trades in positive territory near 110.70, snapping the six-day losing streak, during the early European trading hours on Tuesday. However, the potential upside for the cross might be limited due to the coordinated intervention between the United States (US) and Japan, which could provide some support to the Japanese Yen (JPY) against the Australian Dollar (AUD).
“The view that FX intervention cannot have a lasting impact and merely alters short-term market flows seems right in many cases. However, depending on the circumstances and broader context, intervention can exert a significant influence on the market and trigger an inflection,” said Bank of America analyst Shusuke Yamada.
Japan and US step in to stabilise Yen after historic slide
Strategists at BNY note that Japan’s finance ministry and the US Treasury have “intervened in the foreign exchange market to support the yen” after the currency weakened to its lowest level against the Dollar since 1986. Japanese Finance Minister Satsuki Katayama is cited as saying the joint action was aimed at “countering excessive volatility and disorderly movements in recent months,” underscoring that Tokyo “would not hesitate to carry out further joint intervention if needed.” BNY concludes that the authorities have made it clear they “remain ready to defend the currency” should renewed pressure on JPY emerge.
Technical Analysis:
In the daily chart, AUD/JPY extends a corrective move below the 100-day simple moving average (SMA) and the Bollinger Bands 20-day middle band, which form a dense overhead supply zone. The pair is now drifting toward the lower Bollinger band support, while the Relative Strength Index (RSI) at 34.33 hovers just above oversold territory, hinting that bearish momentum remains in control but could be nearing exhaustion.
On the downside, immediate support is located at the lower Bollinger band near 110.40, where a pause or bounce could emerge if sellers take profits. The next contention level to watch is the 110.00 psychological level, followed by the August 3 low of 109.24.
On the topside, initial resistance is seen at the 100-day SMA at 112.85, followed by the Bollinger Bands middle band at 113.00; a daily close above these clustered barriers would be needed to ease the current bearish bias and open the way toward the upper Bollinger band near 115.62.
(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.
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