AUD/JPY Forecast: Bullish Momentum Holds Firm Above 108.50 as Crucial Australian Jobs Data Looms

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AUD/JPY Forecast: Bullish Momentum Holds Firm Above 108.50 as Crucial Australian Jobs Data Looms

SYDNEY, March 2025 – The AUD/JPY currency pair continues displaying remarkable resilience, maintaining its bullish posture firmly above the critical 108.50 support level as global forex markets shift their attention toward upcoming Australian employment statistics. This sustained upward momentum reflects complex interactions between monetary policy expectations, commodity price movements, and shifting risk sentiment across Asian trading sessions.

AUD/JPY Technical Analysis: Bullish Structure Intact

Technical analysts observe the AUD/JPY maintaining its constructive pattern above 108.50. The pair recently tested this crucial support zone multiple times without breaking lower, demonstrating substantial buying interest at these levels. Furthermore, the 50-day moving average continues trending upward, providing dynamic support around 107.80. Market technicians highlight several key technical factors currently influencing price action:

• Support and Resistance Levels: Immediate resistance sits near 109.20, followed by the psychological 110.00 barrier. Support remains firm at 108.50, with secondary support around 107.80.
• Momentum Indicators: The Relative Strength Index (RSI) holds in neutral territory around 58, suggesting room for additional upward movement before reaching overbought conditions.
• Volume Analysis: Trading volume patterns show increased activity during Asian sessions, particularly during Australian economic data releases.

Australian Employment Data: The Coming Catalyst

The Australian Bureau of Statistics will release March employment figures this Thursday, creating significant potential volatility for the Australian dollar. Economists surveyed by major financial institutions anticipate several key metrics from this crucial dataset. Employment change expectations center around +25,000 new positions, while the unemployment rate likely holds steady at 4.2%. Additionally, participation rate figures should remain near historical highs at 66.7%. These employment statistics carry substantial weight because they directly influence Reserve Bank of Australia policy decisions. Strong employment data typically supports Australian dollar strength through heightened interest rate expectations. Conversely, weaker-than-expected figures could prompt dovish policy reassessments, potentially undermining AUD momentum.

Central Bank Policy Divergence Driving Currency Flows

Monetary policy divergence between the Reserve Bank of Australia and Bank of Japan creates fundamental support for AUD/JPY strength. The RBA maintains a relatively hawkish stance compared to global peers, with interest rates at 4.35% as of March 2025. Meanwhile, the Bank of Japan continues its ultra-accommodative monetary policy despite recent minor adjustments. This policy differential generates substantial yield advantage for Australian dollar holders, encouraging carry trade activity. However, analysts caution that shifting global risk sentiment can quickly alter these dynamics, particularly during periods of market stress when traders unwind carry positions.

Commodity Correlations and Risk Sentiment

The Australian dollar maintains strong positive correlation with commodity prices, particularly iron ore and copper. Recent stabilization in Chinese industrial demand provides underlying support for Australian export commodities. Iron ore prices hover near $120 per ton, sustaining Australia’s trade surplus and supporting fundamental AUD valuation. Meanwhile, the Japanese yen traditionally functions as a safe-haven currency during market uncertainty. Consequently, AUD/JPY often serves as a barometer for broader risk appetite across Asian financial markets. Current market conditions show moderate risk-on sentiment, benefiting higher-yielding currencies like the Australian dollar against funding currencies like the yen.

Historical Context and Market Psychology

The AUD/JPY pair has navigated substantial volatility throughout the past decade, ranging from pandemic-era lows near 59.00 to post-crisis highs above 100.00. The current trading range between 105.00 and 110.00 represents a consolidation phase following the pair’s recovery from 2023 lows. Market participants remember the pair’s sensitivity to Chinese economic data, given Australia’s export dependence on Chinese markets. Additionally, the currency cross exhibits heightened responsiveness to changes in global bond yield differentials, particularly between Australian and Japanese government securities.

Institutional Positioning and Market Structure

Commitment of Traders reports from major exchanges reveal net long positioning in AUD/JPY futures among institutional investors. Hedge funds and asset managers maintain constructive outlooks on the currency pair, citing favorable interest rate differentials and improving global growth prospects. However, options market data shows increased demand for downside protection ahead of the Australian jobs report, indicating trader awareness of potential volatility. Market structure analysis suggests algorithmic trading systems have increased their participation in AUD/JPY, particularly around technical levels and economic data releases.

Regional Economic Integration and Currency Impacts

Australia and Japan maintain deep economic ties through the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Bilateral trade flows exceed $70 billion annually, creating natural currency conversion demand that influences spot market dynamics. Japanese investment in Australian infrastructure and energy projects generates consistent yen-to-Australian-dollar conversions, providing structural support for the currency pair. Meanwhile, Australian tourism to Japan has recovered to pre-pandemic levels, creating additional currency exchange flows during peak travel seasons.

Conclusion

The AUD/JPY forecast maintains a cautiously optimistic tone as technical structure holds above 108.50 and fundamental drivers remain supportive. Upcoming Australian employment data represents the immediate catalyst that could determine near-term direction for the currency pair. Traders should monitor the 108.50 support level closely, as any sustained break below this zone would challenge the current bullish narrative. Meanwhile, resistance near 109.20 and 110.00 presents key upside targets if employment data surprises positively. The broader AUD/JPY outlook remains contingent upon central bank policy trajectories, commodity price developments, and global risk sentiment dynamics through the second quarter of 2025.

FAQs

Q1: Why is the 108.50 level so important for AUD/JPY?
The 108.50 level represents a critical technical support zone where the pair has found consistent buying interest. It also aligns with psychological round-number support and has served as a pivot point for multiple trend changes throughout 2024.

Q2: How does Australian employment data affect AUD/JPY?
Strong Australian employment data typically strengthens the Australian dollar by increasing expectations for Reserve Bank of Australia interest rate hikes. This widens the yield differential with Japan, making AUD more attractive to investors seeking higher returns.

Q3: What role does the Bank of Japan policy play in AUD/JPY movements?
The Bank of Japan maintains ultra-low interest rates, making the yen a popular funding currency for carry trades. Any shift toward policy normalization could reduce the attractiveness of short-yen positions, potentially pressuring AUD/JPY lower.

Q4: How do commodity prices influence AUD/JPY?
Australia is a major commodity exporter, particularly of iron ore and coal. Rising commodity prices improve Australia’s terms of trade and support AUD valuation. Since Japan imports most commodities, higher prices can pressure JPY, creating a double effect on AUD/JPY.

Q5: What are the main risks to the current bullish AUD/JPY forecast?
Key risks include weaker-than-expected Australian economic data, a sudden shift in global risk sentiment prompting safe-haven yen buying, unexpected Bank of Japan policy tightening, or a significant downturn in Chinese demand for Australian commodities.

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