The AUD/JPY cross is in a bearish trend, with the Japanese Yen (JPY) strengthening against the Australian Dollar (AUD). This is largely due to the possibility of further currency intervention from Japanese authorities, as well as the market's perception of a 76% chance of a Bank of Japan (BoJ) rate hike in September. The AUD/JPY is currently trading around 112.55, with immediate resistance at 112.70 and the 100-day moving average at 112.90. On the upside, a daily close above these levels could open the way toward the July 27 high of 114.67 and the Bollinger upper band near 115.40. On the downside, initial support emerges at the August 10 low of 111.63, with the key contention level at the Bollinger lower band at 110.00.
The Japanese Yen is one of the world's most traded currencies, and its value is determined by various factors, including the performance of the Japanese economy, the Bank of Japan's policy, the differential between Japanese and US bond yields, and risk sentiment among traders. The BoJ's mandate includes currency control, and its moves are key for the Yen. The BoJ has directly intervened in currency markets to lower the value of the Yen, although it refrains from doing so often due to political concerns. The BoJ's ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to policy divergence with other central banks.
The Japanese Yen is often seen as a safe-haven investment, and in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. This is likely to strengthen the Yen's value against other currencies seen as more risky to invest in. The AUD/JPY's bearish trend is a reflection of these broader market dynamics and the potential for further intervention by Japanese authorities.
