The AUD/JPY stopped falling after concerns arose about intervention to strengthen the Japanese Yen. This caused a nearly 300-pip rebound, and the Relative Strength Index (RSI) suggests a possible pause before the trend resumes. The exchange rate stabilized around 106.61, remaining steady despite prior losses. The outlook for the pair is positive, facing resistance at 109.00 within an upward trend channel. The intervention fears earlier caused a drop to 106.08, nearly 300 pips down. If the pair rises above 107.59, it might reach targets between 108.00 and 109.00.

Downside Risks and Support Levels

If the pair falls below 103.00, support levels at 105.22 and 105.00 may come into play. Further declines could aim for support near 104.40. This week, the Australian Dollar was the strongest against the US Dollar among major currencies. Looking back to this time in 2025, we saw the AUD/JPY pair stall at around 106.00 due to intervention fears from Japanese authorities. That 300-pip pullback was a clear sign of how quickly market sentiment can change, even during a strong uptrend. Eventually, those fears faded, and the pair continued to rise for the rest of the year. The reasons affecting this pair remain the same but are more evident now in early 2026. We learned about Australia’s Q4 2025 inflation rate of 4.1%, which pressures the Reserve Bank of Australia to keep interest rates high. At the same time, the Bank of Japan is maintaining its very loose monetary policy, creating a big interest rate gap that benefits the Australian dollar.

Strategic Trading Approaches

This difference in policy suggests that AUD/JPY is likely to continue upwards. Traders might think about buying call options to take advantage of a potential rise toward 108.00 or 109.00. This strategy allows for participation in the upside while also limiting risk. Given the current consolidation, a bull call spread could be a good strategy in the coming weeks. This involves buying one call option and selling another at a higher strike price, lowering the overall cost of the position. It’s a way to invest in a steady and gradual rise rather than a sudden spike. However, the possibility of intervention never fully goes away, as seen in early 2025. Traders should stay alert and consider using the 105.00 level as a point for a mental stop or to hedge long positions. A small purchase of out-of-the-money put options can act as affordable insurance against any unexpected announcements from Tokyo. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now