AUD/JPY Price Forecast: Pair Dips to 113.50, But Uptrend Structure Holds

The AUD/JPY currency pair edged lower during Tuesday’s trading session, slipping to around 113.50 as profit-taking and cautious risk sentiment weighed on the Australian dollar. Despite the intraday weakness, the broader technical structure continues to favor the bulls, with the pair holding above key support levels that have underpinned the rally since early March.

Technical Outlook: Support Holds Above 113.00

From a technical perspective, AUD/JPY remains within a well-defined ascending channel on the daily chart. The recent pullback from the 114.50 resistance zone appears to be a healthy correction within the broader uptrend. The 113.50 level coincides with the 20-day exponential moving average, which has provided reliable support during previous dips.

Traders are closely watching the 113.00 psychological level as a critical floor. A sustained break below that area would signal a deeper retracement, potentially opening the door toward the 112.20 region. However, the overall trend momentum indicators, including the MACD and RSI, remain in bullish territory, suggesting that buyers are still in control.

Market Drivers: Risk Sentiment and Divergent Monetary Policy

The Australian dollar’s recent gains against the yen have been supported by a generally positive risk appetite in global markets, driven by optimism around China’s economic recovery and resilient commodity prices. Australia’s terms of trade remain favorable, providing a fundamental tailwind for the currency.

On the yen side, the Bank of Japan’s ultra-loose monetary policy continues to exert downward pressure on the currency. Despite occasional intervention warnings from Japanese officials, the interest rate differential between Australia and Japan remains wide, making carry trades attractive for investors. This structural dynamic has been a key driver of the AUD/JPY uptrend over the past several weeks.

What This Means for Traders

For short-term traders, the current pullback may present a buying opportunity near the 113.30–113.50 support zone, provided the broader uptrend remains intact. Stop-loss orders placed below 113.00 could help manage downside risk. Medium-term traders, however, should remain vigilant for any shift in risk sentiment or unexpected policy signals from the Bank of Japan that could disrupt the trend.

The pair’s ability to hold above 113.00 in the coming sessions will be a key test of trend strength. A bounce from current levels would likely target a retest of the 114.50 resistance, with a breakout above that opening the path toward the 115.00 handle.

Conclusion

AUD/JPY’s dip to 113.50 represents a routine pullback within an otherwise healthy uptrend. The combination of supportive technical levels, favorable interest rate differentials, and resilient risk appetite suggests the path of least resistance remains higher. However, traders should monitor risk sentiment closely, as any deterioration could accelerate the correction. The 113.00 level remains the key line in the sand for the bullish outlook.

FAQs

Q1: Is AUD/JPY still in an uptrend despite the drop to 113.50?
Yes. The broader uptrend remains intact as the pair holds above the 20-day EMA and the ascending channel support. The dip is considered a normal correction within the bullish structure.

Q2: What are the key support and resistance levels for AUD/JPY?
Immediate support is at 113.00, followed by 112.20. On the upside, resistance is at 114.50, with a breakout targeting 115.00.

Q3: What factors are driving the AUD/JPY exchange rate?
The pair is primarily driven by risk sentiment, commodity prices, and the interest rate differential between the Reserve Bank of Australia and the Bank of Japan. Australia’s trade links with China and the BOJ’s ultra-loose policy are key influences.