AUD/JPY traded around 114.10 in early European trading on Wednesday. Market activity was muted ahead of a Trump–Xi meeting in Beijing on Thursday and Friday.
The Australian Dollar was still supported by expectations of a firmer Reserve Bank of Australia stance, though the bank is widely expected to stay on hold. Potential Japanese currency intervention and coordination between Japan’s finance ministry and the US Treasury were cited as possible limits on AUD/JPY gains.
On the daily chart, the pair stayed above the 20-day Bollinger SMA and the 100-day SMA, keeping the upward trend in place. The 14-day RSI was near 60, showing positive momentum without overbought conditions.
Resistance was near 114.85 at the upper Bollinger band. Support was seen at 113.75 near the mid-band, then 112.65 at the lower band, with the 100-day SMA at 110.05 as a deeper floor.
The Japanese Yen is influenced by Japan’s economy, Bank of Japan policy, yield gaps versus US bonds, and risk sentiment. The BoJ’s ultra-loose policy from 2013 to 2024 weakened the Yen, while a gradual shift away from it in 2024 has offered some support.
The bullish trend in AUD/JPY remains intact, pushing the cross above 115.50 as of mid-May 2026. This move reinforces the view that holding above key long-term support, now sitting around the 112.50 level, is crucial for the uptrend. For traders, this suggests that buying on dips continues to be a viable strategy in the coming weeks.
The Reserve Bank of Australia is providing a strong tailwind for the Aussie dollar, maintaining a hawkish policy stance. With the cash rate holding at 4.35% and first-quarter inflation coming in at a stubborn 3.8%, the market is not expecting any near-term rate cuts. This policy divergence is a key factor we see driving the pair higher.
We remember the intense focus on US-China relations back in 2025, when high-level summits could significantly move the China-proxy Aussie dollar. Today, that sensitivity remains, and recent Chinese manufacturing PMI figures coming in slightly above the 50-point mark are providing modest support. Any further signs of economic stability from China should be seen as a positive catalyst for the AUD.
However, the risk of intervention from Japanese authorities remains the primary cap on this rally. We saw direct market action by the Ministry of Finance to support the yen on several occasions through late 2024 and 2025. Current verbal warnings from officials suggest they are watching the currency’s weakness closely, which could cause sharp, sudden reversals if the yen continues to fall.
The wide interest rate differential continues to make the AUD/JPY carry trade extremely attractive. The RBA’s 4.35% cash rate vastly outweighs the Bank of Japan’s policy rate of just 0.25%, a spread that has widened in the last year. As long as this gap persists, traders will likely be rewarded for holding long AUD/JPY positions through the positive swap.
For derivative traders, this environment suggests using options to manage the sharp risk of intervention. Buying call options or implementing bull call spreads on AUD/JPY allows for participation in the underlying uptrend driven by rate differentials. This approach clearly defines the maximum risk, which is prudent given the potential for sudden JPY strength if officials decide to act.
