AUD/JPY extended its decline at the start of the week, sliding to the 109.40–109.35 area, its lowest since late March. The pair then steadied around the 110.00 psychological level in European trade while holding above its 200-day Simple Moving Average (SMA), and it was still down close to 0.50% on the day. The move followed an intraday rejection near 111.25–111.15, reinforcing Friday’s break from a trading range that had held for nearly four months.
The yen outperformed after a joint US-Japan FX intervention on Friday, alongside references to possible further action. Support also came from the Bank of Japan’s willingness to keep lifting borrowing costs, while fading expectations of an immediate Reserve Bank of Australia rate rise weighed on the Australian dollar. Technically, the Moving Average Convergence Divergence (MACD) is deeper in negative territory, though the 14-day Relative Strength Index is near 27, leaving attention on a potential break below the 200-day SMA at 109.25; resistance is still seen around 111.15–111.25, with the prior swing referenced near 115.00.
Derivative Trading Strategies Amid Oversold Signals
We suggest that derivative traders prepare for heightened volatility in the AUD/JPY cross as it tests the critical 200-day Simple Moving Average (SMA) near 109.25. Because the daily Relative Strength Index (RSI) has dipped into oversold territory around 27, we should avoid rushing into fresh short positions immediately. Instead, we recommend waiting for a confirmed daily close below the 109.25 level before buying put options or entering short futures contracts.
Fundamental and Technical Drivers: Yen Intervention and Rate Differentials
Our bearish outlook is heavily supported by the aggressive currency interventions from Japanese authorities, who previously deployed a massive 9.8 trillion yen ($62 billion) in a single month to prop up the Yen. Meanwhile, the Bank of Japan has signaled its commitment to raising its benchmark policy rate further from the current 0.25% level to curb inflation. On the other hand, the Reserve Bank of Australia is widely expected to hold its cash rate steady at 4.35%, narrowing the yield differential that previously favored the Aussie dollar.
If the 109.25 support level holds, we could see a short-term relief rally, making short-dated call options a viable play for quick upside scalps. However, any recovery is likely to face heavy selling pressure near the 111.15 to 111.25 resistance zone. For longer-term position traders, we advise using any bounces toward this resistance area as low-risk entry points to build bearish exposure.
