AUD/JPY slips to 112.50 as risk appetite fades, bearish momentum persists

The AUD/JPY cross weakened to near 112.50 during Thursday’s Asian trading session, extending its bearish bias as risk sentiment deteriorated and the divergence between the Reserve Bank of Australia’s (RBA) cautious stance and the Bank of Japan’s (BoJ) tightening signals continued to weigh on the pair.

Why the pair is under pressure

The Australian dollar has been struggling against the Japanese yen as market participants digest the latest policy signals from both central banks. While the RBA has maintained a data-dependent approach, with markets pricing in a possible rate cut later this year, the BoJ has signaled further normalization of its ultra-loose monetary policy, which has underpinned the yen.

Technical indicators also point to sustained downside momentum. The pair has broken below key support levels, and the 14-day Relative Strength Index (RSI) remains in bearish territory, suggesting that sellers are in control. The immediate support is seen at the 112.00 round figure, followed by the 111.50 level, which was a significant pivot in early 2025.

Key levels to watch

On the downside, a sustained break below 112.00 could open the door for a test of 111.50, and then the 111.00 psychological level. On the upside, resistance is now at 113.00, which was previously support, and a recovery above that level would be needed to signal a potential reversal.

Fundamentally, the cross remains sensitive to global risk appetite. As a proxy for risk-on sentiment, the AUD/JPY pair tends to fall when investors seek safe-haven assets, which has been the case amid renewed concerns over global growth and geopolitical tensions.

What this means for traders and investors

For traders, the bearish outlook suggests that any rallies toward 113.00 could be seen as selling opportunities, while a break below 112.00 would confirm further downside. For investors with exposure to Australian or Japanese assets, the exchange rate movements can impact the value of international investments and hedging strategies.

The key events to watch in the coming days include Australian employment data and any commentary from RBA officials, as well as the BoJ’s summary of opinions from its latest policy meeting. Any surprises in these releases could trigger increased volatility in the pair.

Conclusion

In summary, the AUD/JPY pair remains under pressure, with the near-term outlook bearish as long as it stays below the 113.00 resistance. The policy divergence between the RBA and BoJ is likely to continue driving the pair, and traders should monitor upcoming economic data and central bank communications for further direction.

FAQs

Q1: What is driving the AUD/JPY pair lower?
The decline is primarily due to the contrasting monetary policy stances of the RBA and BoJ. The RBA is seen as likely to cut rates, while the BoJ is normalizing policy, which strengthens the yen relative to the Australian dollar.

Q2: What are the key support and resistance levels for AUD/JPY?
Immediate support is at 112.00, followed by 111.50. Resistance is at 113.00, and a break above that level could signal a reversal of the current downtrend.

Q3: How does global risk sentiment affect AUD/JPY?
AUD/JPY is considered a risk-on currency pair. When investor confidence is high, the Australian dollar tends to strengthen, and when risk appetite fades, the yen often gains as a safe-haven currency, pushing the pair lower.