The AUD/JPY currency pair is experiencing 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 potential for faster-than-expected interest rate hikes by the Bank of Japan (BoJ).
The market's current sentiment is evident in the 76% probability of a BoJ rate hike in September, a significant shift from the 24% probability just a month ago. This shift in sentiment is further supported by the recent joint intervention by Japan and the US, which has helped to correct the JPY's undervaluation. The AUD/JPY pair is currently trading around 112.55, with immediate resistance at 112.70 and the 100-day moving average at 112.90.
The technical analysis of the AUD/JPY pair suggests a bearish bias, with the price capped beneath the Bollinger middle band and the 100-day moving average. The Relative Strength Index (RSI) is neutral, indicating a consolidative tone rather than strong directional momentum. Downside risks remain dominant as long as the cross stays under the 100-day average.
The JPY's strength is also influenced by its status as a safe-haven investment. In times of market stress, investors are more likely to put their money in the JPY due to its perceived reliability and stability. This is particularly true when compared to other currencies that are seen as more risky to invest in.
The BoJ's ultra-loose monetary policy between 2013 and 2024 has led to a widening policy divergence with other central banks, particularly the US Federal Reserve. This has supported a widening of the differential between the 10-year US and Japanese bonds, favoring the US Dollar against the JPY. However, the BoJ's decision to gradually abandon this policy in 2024, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
In conclusion, the AUD/JPY pair is experiencing a bearish trend, with the JPY strengthening against the AUD. This is influenced by the potential for further currency intervention, the possibility of faster-than-expected interest rate hikes, and the JPY's status as a safe-haven investment. The technical analysis suggests a bearish bias, with the price capped beneath key resistance levels. The market's sentiment is shifting, and the JPY's strength is likely to continue in the near term.
