Insights 
VT 
Recent Economic Data and BoJ Outlook
Technically, the cross is bolstered by a bullish RSI above 58.10 and remains above the 100-day EMA. Resistance at 101.75 could lead to potential rallies if surpassed, while falling below 100.00 may trigger a move towards 98.97.
The Japanese Yen’s value is influenced by the country’s economic performance, BoJ policies, and the differential between Japanese and US bond yields. The Yen is also considered a safe-haven in market uncertainties, potentially increasing in value during such times.
With AUD/JPY currently around 100.85, we see a clear divergence in economic momentum that should guide strategy in the coming weeks. The Australian dollar is being supported by a strong domestic economy, while the Japanese yen is weighed down by a recent economic contraction. This fundamental split points towards continued upward pressure for the pair.
Policy Divergence and Trade Strategy
We must consider the latest data reinforcing this view. The Australian Bureau of Statistics confirmed on November 13 that the unemployment rate held steady at a robust 4.1%, defying forecasts for an increase. This gives the Reserve Bank of Australia cover to maintain its hawkish stance, having held rates at 4.35% earlier in the month.
On the other hand, Japan’s economy shrank by an annualized 1.8% in the third quarter, significantly worse than expected. This has all but eliminated market expectations for a Bank of Japan rate hike in December. This policy divergence is the primary driver and creates a tailwind for the cross.
For traders, this suggests a bullish bias is appropriate while the cross remains above the 100-day EMA. Buying call options with strike prices above the 101.75 resistance could be a viable strategy to capture a potential move towards 102.30, which was the high from November 2024. The bullish RSI reading near 58.10 supports the idea that there is still room for upward momentum.
However, we must manage risk around the key 100.00 psychological level. A decisive break below this support could invalidate the bullish thesis. To hedge against this, purchasing put options with a strike around 99.50 could protect against a sharp move down towards the recent November 7 low near 98.97.
The broader market environment also supports a higher AUD/JPY, as global risk sentiment is stable with the VIX index holding near a relatively low 15. This reduces the appeal of the Japanese Yen as a safe-haven asset. As long as market volatility remains subdued, this factor will continue to work against the Yen and in favour of the Australian dollar.
