AUD/JPY edged up to about 113.00 in early European trade on Wednesday after the Reserve Bank of Australia raised rates and maintained a hawkish stance. The RBA lifted the Official Cash Rate by 25 bps to 4.10% at its March meeting, following a similar move in February and marking the first back-to-back rises since mid-2023. Governor Michele Bullock said prices remained too high, and the board was concerned about second-round effects from higher energy costs linked to the Middle East conflict. Focus now turns to Australia’s February jobs figures due on Thursday, with the Unemployment Rate forecast to hold at 4.1%.

Middle East Risk And Safe Haven Demand

Middle East developments are also being watched for their impact on safe-haven demand. The BBC reported that Iranian security chief Ali Larijani was killed in Israeli air strikes, and Iranian army chief Amir Hatami said Iran would launch a decisive and regrettable retaliation. On the chart, AUD/JPY stays above the 100-day exponential moving average near 106.40, with RSI in the low 60s. Resistance sits at 113.70 and 113.80, with 115.00 next, while support is at 111.40, 110.15–110.35, and 108.70. With the Reserve Bank of Australia hiking rates to 4.10%, we see a clear signal of strength for the Aussie dollar. This is the second consecutive rate increase, reinforcing a hawkish stance not seen since mid-2025. This policy divergence strongly favors the AUD over the Japanese Yen, making long positions in AUD/JPY attractive. The RBA’s worry about inflation is well-founded, given the recent spike in energy costs from the Middle East conflict. We saw a similar situation back in 2022 when the conflict in Eastern Europe pushed WTI crude oil prices above $120 per barrel, showing how quickly geopolitical events can fuel inflation. This history supports the RBA’s decision to act now, which should continue to prop up the Aussie. However, the escalating tension in the Middle East presents a significant risk to this trade. The killing of an Iranian security chief and vows of retaliation are driving safe-haven demand directly into the Japanese Yen. Derivative traders should consider hedging long AUD positions with puts, as a full-blown conflict could quickly unwind recent gains.

Key Catalyst Australia Jobs Data

This week’s Australian employment data is the next major catalyst. An unemployment rate holding at the expected 4.1% would confirm the labor market is resilient enough to handle higher interest rates, giving the RBA more room to hike. This figure remains low compared to historical averages, showing the economy is still on solid footing despite the global pressures we’ve seen build since 2025. From a technical standpoint, the pair’s momentum is strong, suggesting buying call options is a viable strategy. With the price holding firmly above the 100-day average near 106.40 and RSI staying below overbought levels, there appears to be more room to run. A clean break above the 113.80 resistance level could open a path toward the 115.00 psychological mark. For risk management, the 111.40 level serves as an initial floor for the current uptrend. A break below this support might be a signal to tighten stops or reduce long exposure. The most critical level to watch is the 108.70 area, as a drop below this would threaten the entire bullish structure we’ve seen build over recent months. Create your live VT Markets account and start trading now.

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