AUD/JPY rose to about 98.85 during the early European session, keeping a positive outlook. The next resistance level is at 99.50, while a short-term downside target is set at 97.84. The bullish momentum for AUD/JPY is supported by an RSI of 55.0, indicating an upward trend. If the pair breaks above 99.50, it could aim for 100.00 or even 100.40.

Bank of Japan’s Influence

Support is at 97.84, and if it drops below this, it may fall to 96.86 and 96.65. The value of the Japanese Yen is affected by the Bank of Japan’s policies and the differences between Japanese and US bonds. Since 2013, the BoJ has maintained an ultra-loose monetary policy, impacting the Yen’s value against major currencies. Recent policy changes have provided some support to the Yen. Over the last ten years, the gap between BoJ and US Federal Reserve policies has widened the bond differentials. The BoJ’s shift in policy for 2024 and recent rate cuts by other central banks are helping to close this gap. The Japanese Yen is viewed as a safe-haven currency. In times of market uncertainty, it tends to strengthen due to its perceived stability.

Current Market Drivers

Previously, the bullish outlook for AUD/JPY was based on past US-China trade discussions. On October 23, 2025, the market dynamics have changed, but the upward trend remains strong. The primary driver has shifted from geopolitical hopes to clear differences in monetary policies. For the Australian dollar, inflation remains stubborn at 3.8% for the third quarter of 2025. This has led the Reserve Bank of Australia to maintain a “higher for longer” stance, keeping the cash rate at 4.35%. This policy supports the Aussie dollar against lower-yielding currencies. Conversely, the Bank of Japan is gradually moving away from its ultra-loose policy, which ended in 2024. Although the BoJ raised its policy rate to 0.25% in July 2025, it is still much lower than rates in other countries. This interest rate gap fuels the carry trade, where traders borrow yen to invest in higher-yielding Australian assets. This significant interest rate difference means traders benefit from holding long AUD/JPY positions. This is reflected in the derivatives market, where demand for call options, expiring in one to three months, is strong. Buying call options lets traders profit from further increases while limiting risk to the premium paid. We should monitor for any signs of global risk aversion, which typically strengthens the safe-haven yen. Recent worries about slowing European growth have caused some short-term volatility. Traders might consider using put options below crucial support levels to guard against sudden market downturns. Currently, the pair is facing resistance around 103.50, a level it has tested multiple times this month. A sustained break above this could lead to the psychological level of 105.00. Key support is now at the 50-day moving average near 102.20, which must hold to keep the bullish trend intact. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now