AUD/JPY Slides as Yen Firms Under Pressure from Intervention Concerns

The AUD/JPY currency pair slid to around 112.35 in early European trading on Thursday, maintaining its short-term bearish tone below the 100-day simple moving average (SMA). This move came as the Japanese Yen strengthened against the Australian Dollar.

Market participants are keeping a close eye on potential intervention by Japanese authorities and comments from RBA Governor Michele Bullock, who is set to speak on Friday. According to Goldman Sachs Research strategist Karen Fishman, recent support for the Yen may be losing traction, with intervention being 'not a sustainable fix … ultimately just buys some time.'

The Bank of Japan (BoJ) recently signaled rising concerns over inflation and interest rate trajectory in its summary of opinions from the July meeting. One policy board member indicated that the pace of interest rate increases could accelerate, potentially leading to another rate hike at the September policy meeting.

DBS Group Research noted the exceptional nature of the latest efforts to support the Yen, observing that 'co-ordinated FX intervention between the US and Japan is rare' and has only occurred once before in 2011. This past episode casts the current situation in a different light, with policymakers now using similarly rare measures in response to pronounced Yen weakness rather than strength.

The technical picture for AUD/JPY shows a bearish short-term configuration as the cross trades back below the 20-period Bollinger Bands simple moving average and remains constrained by the 100-day SMA. Price action continues to hold well above the lower Bollinger band, indicating that the broader uptrend is still intact.