AUD/JPY Turns Bullish: Technical Outlook and Key Drivers

The AUD/JPY pair is showing a bullish development, with technical indicators pointing to continued upside momentum as of mid-June 2025. This shift reflects a combination of improved risk sentiment in the market and diverging monetary policy expectations between the Reserve Bank of Australia (RBA) and the Bank of Japan (BoJ).

What is driving the AUD/JPY bullish move?

The recent bullish bias in AUD/JPY is primarily attributed to a rebound in risk appetite, which typically benefits the Australian dollar as a higher-yielding currency. Meanwhile, the Japanese yen remains under pressure due to the BoJ’s persistently accommodative stance, despite some speculation about potential policy adjustments. As of this week, the pair has broken above a key resistance level, suggesting that buyers are in control.

Technical analysis shows that the pair has formed a series of higher highs and higher lows, a classic sign of an uptrend. The 50-day moving average is trending upward, and the Relative Strength Index (RSI) is hovering around 60, indicating bullish momentum without being overbought. This suggests there is room for further gains before the pair becomes stretched.

Key levels to watch in AUD/JPY

For traders, the immediate resistance is seen near the 104.50 level, which aligns with a previous swing high. A decisive break above this could open the door to the 105.00 psychological level. On the downside, support is found at 103.50, followed by the 103.00 area, which coincides with the 20-day moving average.

Fundamentally, the Australian dollar is receiving support from stronger-than-expected domestic data, including employment figures and inflation readings, which have led markets to price in a possible rate hike by the RBA later this year. In contrast, Japan’s economic recovery remains fragile, and the BoJ has reiterated its commitment to ultra-loose monetary policy, widening the yield differential in favor of the Aussie.

Why this matters for forex traders

Understanding the AUD/JPY dynamics is crucial for traders exposed to risk sentiment and carry trades. The pair often serves as a barometer for global risk appetite, and its bullish turn suggests that investors are becoming more comfortable with riskier assets. This could have broader implications for other currency pairs and equity markets.

Conclusion

In summary, AUD/JPY is exhibiting a bullish development driven by risk-on sentiment and policy divergence. While the technical outlook remains constructive, traders should monitor key resistance and support levels, as well as upcoming economic data from both countries, to gauge the sustainability of this move. As always, prudent risk management is advised in volatile market conditions.

FAQs

Q1: What does a bullish AUD/JPY indicate?
A bullish AUD/JPY indicates that the Australian dollar is strengthening against the Japanese yen, often reflecting improved risk appetite in the market. It can also signal expectations of higher interest rates in Australia relative to Japan.

Q2: What are the key levels to watch in AUD/JPY?
Immediate resistance is at 104.50, with a potential move toward 105.00. Support is seen at 103.50 and then 103.00, which aligns with the 20-day moving average.

Q3: How does the BoJ policy affect AUD/JPY?
The BoJ’s ultra-loose monetary policy keeps the yen weak, which tends to support AUD/JPY. Any hints of policy tightening could strengthen the yen and reverse the pair’s bullish trend.