The AUD/JPY pair showed strength reaching around 102.75 during the early European session on Thursday. This was buoyed by technical indicators like a bullish RSI and positioning above key moving averages. Initial resistance is at 102.88, while support is anticipated at 101.41. The diminishing chances of policy easing by the Reserve Bank of Australia (RBA) have supported the Australian Dollar against the Japanese Yen. The RBA is expected to maintain its cash rate at 3.60% during its upcoming monetary policy meeting, with potential moves possibly occurring as far forward as 2026 due to inflation concerns.
Technical analysis shows AUD/JPY trading at 102.79, holding above the 20-day SMA at 101.41 and the 100-day EMA at 98.75. The Bollinger Bands indicate buy-side pressure, with an RSI reading of 65.02 suggesting bullishness with no signs of overbought conditions. Price holding above the 20-day baseline maintains momentum for the pair.
Key Drivers for the Australian Dollar
Key drivers for the Australian Dollar include the RBA’s interest rates, iron ore prices, the Chinese economy, and Australia’s trade balance. The RBA influences AUD through interest rates and quantitative easing or tightening. China’s economic health affects AUD due to the trading relationship, while iron ore prices and the trade balance directly impact the currency’s value.
With AUD/JPY holding firm around 102.75, the bullish technical signals give us confidence in the current upward trend. The Relative Strength Index is strong but not yet overbought, suggesting there could be more room to climb. All eyes are on the Reserve Bank of Australia’s policy meeting next week, which is the immediate catalyst.
The expectation for the RBA to hold its cash rate at 3.60% is well-founded, especially after we saw the October 2025 monthly CPI indicator come in at 3.8%. This persistence above the target band reinforces the idea that rate cuts are off the table for now. Derivative markets are likely pricing out any dovish surprises, making long AUD positions against the JPY look attractive.
Beyond monetary policy, we see support for the Aussie coming from commodity markets. Iron ore prices have been robust, recently trading above $135 a tonne, which directly benefits Australia’s export earnings. This is bolstered by recent data from our largest trading partner, as China’s latest Caixin Manufacturing PMI for November 2025 showed continued expansion at 50.9.
Considering the Japanese Yen Side
We must also consider the Japanese Yen side of the equation, where the Bank of Japan remains comparatively dovish. The interest rate differential between the RBA’s 3.60% and the BoJ’s policy rate creates a favorable environment for carry trades. This dynamic is reminiscent of what we saw during the 2022-2024 period, when central bank policy divergence was a primary driver for this pair.
Given the constructive outlook, traders could consider buying call options or establishing bull call spreads with strike prices targeting a move above the 102.88 resistance level. The support at 101.41 serves as a crucial level; any dip towards this 20-day average could be viewed as a buying opportunity. The main risk to this view in the coming weeks would be an unexpectedly dovish statement from the RBA or a sudden downturn in Chinese economic data.
