Outlook for the Australian Dollar Against the Yen as Tensions Escalate in the Gulf
The Australian dollar against the Japanese yen (AUD/JPY) traded with a bearish bias at the start of the Asian session on Monday, as geopolitical tensions in the Gulf region continued to escalate. This prompted investors to avoid high-risk assets and seek safe-haven assets, chief among them the U.S. dollar.
AUD/JPY on the Economic Front
The AUD/JPY pair is trading within a sideways-to-bearish range amid escalating military confrontations between the United States and Iran, which have contributed to rising oil prices and renewed concerns about a resurgence of global inflationary pressures.
Over the weekend, U.S. and Iranian forces exchanged missile and drone attacks, Tehran also announced that it had targeted U.S. facilities in several Gulf countries and declared that it was closing the Strait of Hormuz once again, further heightening anxiety in global markets.
The Australian dollar came under selling pressure as a risk-sensitive currency, particularly in the absence of significant economic data from Australia this week, which makes its movements more closely tied to geopolitical developments and global market trends.
Conversely, the Japanese yen remains affected by rising oil prices, given Japan’s heavy reliance on energy imports from the Middle East; however, demand for the Japanese currency remains supported as it is one of the leading safe-haven assets during periods of tension.
The yen also received additional support following remarks by the Japanese finance minister, who indicated the government’s intention to encourage domestic pension funds to increase their investments in Japanese financial assets, which helped improve investor appetite for the Japanese currency.
Technical Analysis of the AUD/JPY Pair
From a technical perspective, the AUD/JPY pair is attempting to approach the key resistance zone at 112.70, which coincides with the downtrend line on the hourly chart, making it an important technical zone that may see increased selling pressure.
The MACD indicator also shows a bearish divergence, suggesting that upward momentum may be weakening and increasing the likelihood of a resumption of the downtrend in the near term.
Expected Scenario
Consider selling from current levels or wait for a retest of the 112.70 area to secure a better entry point.
The first target is at 112.00.
The second target is at 111.30.
The bearish scenario is invalidated if the price successfully breaks above 113.55 and closes above it, as this could pave the way for a new uptrend.
