AUD\/JPY extended its pullback for a fifth session after Monday\u2019s brief rise to around 111.20, sliding to the lowest level since early April in Asian trading. The pair was last near the 110.00 handle, down over 0.50% on the day, and remained under pressure following last week\u2019s sharp retreat from its highest level since early June.<\/p>\n\n
The move came as the yen firmed on official action and policy signals. Japan\u2019s Finance Minister Satsuki Katayama said authorities carried out a rare bilateral FX intervention with the US on Friday to stem JPY weakness, while US Treasury Secretary Scott Bessent said Washington could join further coordinated steps if disorderly moves persist. The BoJ retained a hawkish bias at its late-July meeting and indicated readiness to keep lifting borrowing costs, while the AUD softened as markets pared expectations of an imminent RBA hike and after China\u2019s RatingDog Manufacturing PMI disappointed. In Australia, annual core inflation edged up from 3.5% to 3.6% but came in below the 3.7% consensus, alongside weaker headline inflation, after three RBA rate rises this year; speculation also built around a possible 25bps BoJ hike as soon as September.<\/p>\n\n
We suggest that derivative traders immediately pivot toward bearish strategies on the AUD\/JPY cross as the pair breaks below the crucial 110.00 psychological support. Coordinated interventions historically trigger massive, multi-week unwinding of carry trades, similar to the 2024 yen surge where the Japanese currency gained over 10% against its major peers in a matter of weeks. Buying out-of-the-money AUD\/JPY put options expiring in September 2026 allows us to capture this accelerated downward momentum with defined risk.<\/p>\n\n
The joint effort by US and Japanese authorities introduces severe tail risk for carry-trade buyers, especially as implied volatility on yen pairs spikes. With the Bank of Japan hinting at a 25-basis-point interest rate hike in September 2026, the yield differential that previously favored the Australian Dollar is rapidly shrinking. We can exploit this rising volatility by utilizing bear put spreads, which benefit from both a falling spot price and elevated option premiums.<\/p>\n\n
On the other side of the pair, Australia’s easing inflation\u2014with core CPI dropping to 3.6% against expectations of 3.7%\u2014means the Reserve Bank of Australia is highly unlikely to raise rates. Compounding this, China’s manufacturing slowdown directly hits Australia’s export outlook, further depressing the Australian dollar. We believe shorting AUD\/JPY futures or selling call spreads above the 111.20 resistance level offers a highly favorable risk-reward ratio for the coming weeks.<\/p>\n\n\n\n