The AUD/JPY pair remains firm above the 96.00 mark as market sentiment toward the Australian dollar improves amid global economic recovery. However, upside potential seems capped due to renewed geopolitical tensions and Trump’s tariff threats aimed at key Asian trade partners, including Japan and Australia.
Key Drivers Behind AUD/JPY’s Performance:
- Australian Dollar Strength: The Australian economy continues to benefit from rising commodity prices, particularly iron ore and energy exports, providing support to the AUD.
- Yen Weakness: The yen remains under pressure due to Bank of Japan’s (BOJ) ultra-loose monetary policies, which have kept interest rates at historically low levels.
- Tariff Threats: Former U.S. President Donald Trump’s renewed tariff threats against several Asian countries, including Japan and Australia, are weighing on market sentiment. Traders remain cautious, as further tariff implementations could hinder trade and negatively impact risk-sensitive currencies like the AUD.
Technical Analysis of AUD/JPY
The pair is trading near 96.20, holding above the psychological 96.00 level, but upside momentum faces key resistance levels, limiting potential gains.
- Resistance Levels:
- 96.50: Immediate resistance.
- 97.00: Strong psychological resistance, a break of which could open the door to higher gains.
- Support Levels:
- 95.70: Immediate support. A break below could indicate potential bearish correction.
- 95.00: Key support level, where buyers may step back in if sentiment worsens.
Outlook for AUD/JPY
Given the current geopolitical risks, particularly Trump’s tariff threats, traders should exercise caution when pursuing further upside on AUD/JPY. Risk sentiment remains fragile, and a more risk-averse environment could prompt a yen rebound, limiting AUD/JPY’s upside potential. On the flip side, if tensions ease or tariff threats are mitigated, the pair may continue to push higher.
Traders should watch for updates on tariff negotiations and broader risk sentiment in global markets for further cues on AUD/JPY’s direction.