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AUD/JPY remains stable around 93.70, with little movement following the Reserve Bank of Australia’s (RBA) decision to maintain the Official Cash Rate at 4.1%. The RBA expressed caution regarding the economic outlook and indicated a focus on returning inflation to target.
Concerns over US trade policies continue to exert downward pressure on the Australian Dollar. Japanese corporate inflation forecasts, as reported by the Bank of Japan’s Tankan survey, support expectations for further rate hikes, lending support to the JPY.
Market participants may remain cautious ahead of additional announcements related to trade tariffs. Current market conditions suggest that any upward movements in AUD/JPY could be viewed as potential selling opportunities.
Policy Stabilisation And Inflation Signals
Price levels around 93.70 in the AUD/JPY pair have remained relatively unchanged after the Reserve Bank of Australia opted to hold the cash rate steady at 4.1%. This decision aligns with their measured tone on the economy, especially as they attempt to manage inflation without tilting the balance too far. Signals from the statement hinted at restraint, with policymakers doubling down on their goal to nudge inflation back within their preferred range without overly hampering growth.
The RBA’s position also shows that domestic risk tolerance is low, especially as data flow remains mixed. There’s acknowledgement that inflation, although off its highs, is not falling quickly enough to ease up on the policy front. As a result, market narratives in Australia have retained their defensive tilt, which continues to keep the AUD from gaining much ground.
Meanwhile, on the other side of the pair, details from Japan’s quarterly Tankan survey added credibility to expectations for modest tightening. In particular, forecasts of corporate inflation from Japanese firms reflected growing acceptance of higher price levels, strengthening the case for gradual normalisation from the Bank of Japan. This has provided a sturdy base for the yen, with rate differentials now less weighted against it than in previous quarters.
Macro Risks And Trading Behaviour
Geopolitical pressure stemming from shifts in US policy continues to loom over trade-oriented economies like Australia. Heightened rhetoric from Washington, especially around tariffs, is not helping risk sentiment, nor is it improving appetite for currencies that tend to fluctuate more when broader markets lose direction. This has repeatedly pinched Australian Dollar momentum before it could extend gains.
From a practical standpoint, for us watching price responsiveness, any rallies in AUD/JPY present limited runway before encountering technical resistance. The pair has not shown follow-through above the current level, and sellers have consistently appeared in that region. These responses are worth paying attention to because they reflect the broader disinterest in chasing upside when the policy gap between Australia and Japan appears to narrow.
Also important is market inertia; recent moves have not been strong enough to break the pair from its current range. That tells us there is hesitancy – with investors clearly waiting for clearer signals either from central banks or trade developments before rebalancing exposure. So, directional conviction may remain low and risk skew strongly shaped by tariff commentary coming out of the US.
We’re also keeping an eye on implied volatility in options markets, which has not priced in a major shift. That lack of premium tells its own story – mainly that traders do not expect outsized swings in the short term. This holds weight when considering how to lean into trades near resistance or support levels.
Ultimately, the price behaviour we’re seeing now reflects a theme we’ve watched unfold in recent weeks: muted enthusiasm for the Aussie, gradual re-rating of the yen, and macro risks being filtered into relatively narrow moves. As always, tactically speaking, the bias appears to favour reactive selling close to the highs rather than initiating fresh long positions. For those managing exposure, the chart does a fair bit of the work by pointing out where conviction fades.
