The Australian Dollar against the Japanese Yen has declined toward the 114.00 level during early European trading Friday, though technical indicators continue to suggest an upward bias remains intact. The cross currency pair’s weakness follows fresh inflation data from Tokyo showing annual core CPI remained below the Bank of Japan’s 2% target for the fourth straight month in May.
This sustained undershooting of the inflation target may reduce pressure on the BoJ to tighten monetary policy further, potentially weakening the yen in coming sessions despite today’s strength. The persistent disinflation trend in Japan’s capital contrasts with tighter conditions elsewhere, maintaining the wide interest rate differential that has historically supported higher-yielding currencies like the Australian dollar against the yen.
Traders should monitor whether AUD/JPY holds above the 114.00 support level, as a breakdown could trigger stop-losses and accelerate downside momentum despite the broader bullish technical structure.
FXnCO Insight
Watch for potential buying opportunities on dips toward 114.00 as sub-target Japanese inflation supports the longer-term carry trade thesis favoring AUD over JPY.
Source: FXStreet