AUD/JPY surged to a fresh record high this week. The move reflects renewed strength in Aussie following a hawkish turn from the RBA, alongside renewed weakness in the Yen as intervention risks fade and election looms.
On the Australian side, the catalyst has been clear. The RBA became the first major central bank to reverse course from easing, responding to a resurgence in inflation that has been building since late last year. Policymakers highlighted stronger-than-expected consumption and a labor market that remains slightly tight, reinforcing that more policy restraint is needed.
Importantly, the RBA’s own forecasts assume interest rates rise further later this year. While officials have avoided pre-committing to a sequence of hikes, the projection alone has been enough to lift Aussie, particularly against low-yielding peers.
In contrast, Yen has come back under broad-based pressure. The perceived risk of intervention—especially coordinated action between Japan and the US—has receded markedly. Conflicting messages from Japanese officials on Yen weakness suggest authorities are not yet prepared to step in directly, at least not before USD/JPY approaches the 160 area again.
Political positioning has added another pressure to Yen. Some traders are positioning ahead of Sunday’s snap election, where the ruling Liberal Democratic Party could secure an outright majority on the back of strong approval for Prime Minister Sanae Takaichi. While her policy agenda raises longer-term fiscal concerns, a decisive win would also buoy domestic equities, reinforcing risk-on sentiment and keeping the Yen under pressure.
That combination of stronger Australian fundamentals and weaker Japanese currency support has proven potent. Even without a sharp change in global risk sentiment, domestic factors alone are sufficient to sustain AUD/JPY upside.
Technically, momentum has re-accelerated, with D MACD turning higher again. Near-term bias stays firmly bullish as long as 106.84 support holds. The next target sits at the 261.8% projection of 94.38 to 100.93 from 96.24 at 113.38.
Looking further out, the next major hurdle comes in at 61.8% projection of 59.85 (2020 low) to 109.36 (2024 high) from 86.03 (2025 low) at 116.62. Price action around that zone will be key in defining whether the current rally extends into a sustained long-term breakout or pauses after an extended run.
