Key Moments
- AUD/JPY trades near 112.55 in early European hours on Friday, maintaining a bearish short-term tone.
- Market pricing shows a 76% probability of a Bank of Japan rate hike in September, up from 24% on July 30.
- DBS Group Research highlights that JPY undervaluation has narrowed following Japan’s second coordinated FX intervention with the US this year.
Cross Under Pressure as Yen Firms
AUD/JPY weakens to around 112.55 during Friday’s early European session, with the pair trading in negative territory. The move reflects a firmer Japanese Yen (JPY) against the Australian Dollar (AUD), as market participants stay vigilant over the risk of additional currency intervention by Japanese authorities.
Japan’s former top currency official, Mitsuhiro Furusawa, said on Thursday that Tokyo may conduct joint JPY intervention with the United States “at any time” and should signal the chance of faster-than-expected interest rate hikes to arrest the currency’s slide.
According to Tokyo Tanshi data, markets currently assign a 76% probability to a Bank of Japan (BoJ) rate increase in September, sharply higher than the 24% probability observed on July 30.
Intervention Impact and JPY Valuation
DBS Group Research observes that mispricing in the Japanese Yen has started to unwind after recent official action in foreign exchange markets. The bank notes that “the Japanese yen’s (JPY) undervaluation has narrowed from record levels following Japan’s second FX market intervention this year, which was conducted in coordination with the US,” emphasizing the significance of the rare, coordinated steps taken by Japan and the United States to address pronounced JPY weakness.
Technical Picture: AUD/JPY Held Below 100-Day Average
From a technical standpoint, AUD/JPY remains restricted beneath the Bollinger middle band and the 100-day moving average on the daily chart, preserving a bearish bias in the near term as prices are contained under these overlapping resistance levels. The Relative Strength Index (14) stands at 50.43, indicating neutral momentum and pointing to potential consolidation, even as downside risk dominates while the cross trades below the 100-day moving average.
| Level | Description | Price |
|---|---|---|
| Immediate resistance | Bollinger middle band | 112.70 |
| Secondary resistance | 100-day moving average | 112.90 |
| Upside target | July 27 high | 114.67 |
| Further upside zone | Bollinger upper band | Near 115.40 |
| Initial support | August 10 low | 111.63 |
| Key support | Bollinger lower band | 110.00 |
On the upside, the first resistance area is located near the Bollinger middle band at 112.70, with the 100-day moving average at 112.90 forming the next hurdle. A daily close above both of these levels would be required to alleviate selling pressure and clear the way toward the July 27 peak at 114.67, with scope to extend toward the Bollinger upper band around 115.40.
On the downside, initial support is identified at the August 10 trough of 111.63. The key line in the sand is seen at the Bollinger lower band near 110.00; a decisive break below that zone would point to a deeper corrective phase toward the lower boundary of the recent trading range.
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