AUD/JPY slipped to around 109.05 in early European trading on Monday. Trade-war fears, Middle East tensions, and broad uncertainty boosted demand for the Japanese Yen. This kept the pair near 109.00, as investors moved into safer currencies.
The Australian Dollar held up better than usual because traders expect the Reserve Bank of Australia (RBA) to stay firm. Strong Australian data has strengthened the view that the RBA will keep a tightening bias to deal with stubborn inflation.
Daily Chart Technical Overview
On the daily chart, AUD/JPY is still above the 100-day EMA, which sits at 104.35. Price is slightly above the 20-day middle Bollinger Band, and the wide bands suggest high volatility.
The RSI is 56.29, showing neutral momentum after easing from earlier overbought levels. Support sits at 108.82, with the next level lower at 106.98.
Resistance is at 110.65, which is also the upper Bollinger Band. A daily close above 110.65 could signal more upside.
The Yen is driven by Japan’s economic outlook, Bank of Japan (BoJ) policy, bond yield spreads, and overall risk appetite. The BoJ’s very loose policy from 2013 to 2024 weakened the Yen, while policy changes in 2024 have helped support it.
Strategy Implications And Risk Management
AUD/JPY is pulling back near 109.00, which creates a key decision point for our strategies. The bigger trend is still bullish, but short-term safe-haven demand for the Yen is pressuring the pair. This demand is being fueled by renewed US–China trade tensions, especially around technology tariffs. We see this dip as a test of the Australian Dollar’s underlying strength.
The argument for a stronger AUD is still solid, which supports buying into weakness. The RBA remains hawkish, backed by the latest official Q4 2025 data showing annual inflation at 3.9%, well above target. Unemployment is also low at 3.7%. With these conditions, the RBA has little reason to cut its 4.85% cash rate, and that continues to attract yield-focused investors to the Aussie.
At the same time, we need to respect the rising demand for the Yen as a safe haven. Risk sentiment has weakened, with the VIX climbing from 14 to 18 over the past two weeks, which tends to support JPY. For traders, this means long AUD/JPY positions should be protected. Put options with strikes below the 108.82 support level can be a practical hedge against further geopolitical shocks.
We are also watching the BoJ closely. Since the BoJ ended its negative interest rate policy in late 2024, the slow unwind of its ultra-loose stance has helped put a floor under the Yen. Even if normalization remains gradual, it is starting to reduce the large rate gap that has supported the AUD for years.
With volatility elevated (as shown by the wide Bollinger Bands), option premiums are expensive. So, rather than buying options outright, we may prefer structures like bull call spreads. These can target a move toward the 110.65 resistance while limiting the upfront cost, even though they also cap upside. The goal is to manage the high cost of volatility while staying positioned for the longer-term uptrend to resume.
Create your live VT Markets account and start trading now.
here to set up a live account on VT Markets now
