13.01.202621:01 Forex Analysis & Reviews: AUD/JPY. Analysis and Forecast.

The AUD/JPY pair has maintained its upward momentum for a third consecutive day, climbing to a new high since July 2024 in the 106.66–106.71 level. Current market dynamics are supported by fundamental factors suggesting that the short-term price direction remains bullish, albeit with the risk of a corrective pullback.

The Japanese yen remains under pressure amid persistent uncertainty over the timing of the Bank of Japan's next interest rate hike. Additional pressure stems from reports that Prime Minister Sanae Takaichi is prepared to call early parliamentary elections, which analysts believe could strengthen the government's position and pave the way for additional fiscal stimulus.

Expectations of stimulus measures have driven Japan's Nikkei 225 index to another record high, reducing the appeal of the yen as a safe-haven asset and thereby supporting the risk-sensitive Australian dollar.

The deepening diplomatic conflict between Tokyo and Beijing is also weighing on the yen. Last week, China imposed a ban on exports of several rare earth elements to Japan following renewed tensions over Taiwan. This decision has increased risks to supply chains for Japanese industrial companies and further weakened the fundamental outlook for the national currency.

At the same time, the Australian dollar is receiving support from expectations that the Reserve Bank of Australia (RBA) will maintain a hawkish stance on inflation and continue tightening monetary policy. Taken together, these factors form a persistently positive short-term outlook for the AUD/JPY pair. However, in the event of further yen weakness, market participants should remain mindful of the risk of intervention by Japanese authorities.

On Tuesday, Japan's Finance Minister Satsuki Katayama stated that she shares concerns over the one-sided weakness of the national currency. She noted that she had discussed the issue with US Treasury Secretary Scott Bessent, emphasizing that tolerance for yen depreciation has its limits.

These remarks have reinforced expectations of potential intervention by Japanese authorities in the foreign exchange market.

Despite this, ongoing expectations that the Bank of Japan will not abandon its course toward monetary policy normalization may deter yen sellers from aggressively increasing short positions. An additional limiting factor is the pair's moderate overbought condition on the daily chart. Nevertheless, a break above the 106.70 level and sustained consolidation above it confirm the strength of the bullish momentum, suggesting that corrective pullbacks are likely to be viewed as buying opportunities.