The Australian dollar edged lower against the Japanese yen on Tuesday, testing critical support levels below 96.50 as traders positioned themselves ahead of the Reserve Bank of Australia’s (RBA) upcoming policy decision. The pair has struggled to sustain its momentum amid ongoing market uncertainties, with the yen benefiting from its safe-haven status amid global economic concerns.
Recent moves in the AUD/JPY pair reflect a slower-than-expected economic recovery in Australia, as rising inflationary pressures and weaker-than-anticipated growth have put the central bank in a difficult position. With the RBA meeting just around the corner, traders are focused on any signals that may hint at future monetary policy adjustments.
While the RBA is widely expected to keep interest rates unchanged, any shift in tone or unexpected comments on inflation could trigger significant volatility in the AUD/JPY pair. Market participants are particularly attentive to how the central bank views the balance between economic growth and inflation control, with many speculating that a hawkish stance could offer the Australian dollar some support.
AUD/JPY 1-D Chart as of February 18, 2025 (Source: TradingView)
In contrast, the Japanese yen has gained ground in recent weeks, benefiting from a flight to safety amid growing global economic risks. The yen’s strength has been bolstered by concerns over rising energy prices, potential slowdowns in major economies, and geopolitical instability. For the moment, the yen remains one of the most attractive safe-haven currencies in times of heightened uncertainty.
Despite the recent weakness in the Australian dollar, analysts note that the downside for AUD/JPY might be limited in the near term. The pair’s current price level just below 96.50 coincides with a nine-day support trend, and if this level holds, there could be potential for a modest rebound. However, if the support fails to materialize, the pair could face further pressure toward lower levels.
Looking ahead, the RBA’s decision will be a key catalyst for determining the direction of the Australian dollar. Traders will closely monitor any guidance on future rate hikes or changes to the bank’s economic outlook, as these could shift market sentiment significantly. In the short term, AUD/JPY is expected to remain in a narrow range, with a clearer directional bias likely emerging after the policy meeting.
