AUD/JPY Maintains Uptrend but Faces a Crossroad at 106 Amid Rising Geopolitical Tensions

Market Analysis – January 20

The AUD/JPY pair continues to be shaped by a clear divergence in monetary policy and global risk sentiment. On one side, the Australian Dollar draws support from the Reserve Bank of Australia’s relatively hawkish stance and elevated interest rates, which make the AUD attractive in carry trades. On the other, the Japanese Yen remains under pressure due to the Bank of Japan’s reluctance to tighten policy aggressively, compounded by domestic political uncertainty. This yield gap encourages investors to fund positions in low-yielding JPY and rotate into higher-yielding AUD, a dynamic that strengthens AUD/JPY during periods of risk-on sentiment, particularly when commodity demand and global growth expectations remain favorable.

AUD/JPY Key Levels

Supply Levels: 106, 107, 108

Demand Levels: 103, 102, 101

AUD/JPY May Consolidate at 106

The AUD/JPY market has maintained a consistent upward trend, largely supported by ongoing carry-trade activity. However, in recent trading sessions, rising geopolitical tensions have begun to influence market sentiment. Amid these developments, price action is now struggling around the critical 106 level, placing the pair at a key crossroads.

As uncertainty increases, many traders are likely to adopt a more cautious stance. As a result, there is a strong possibility that price action may consolidate around the 106 level before the market determines its next directional move.

AUD/JPY Short-Term Trend

Zooming into a lower timeframe, the market bias appears to confirm consolidation around the 106 price level. Notably, in the most recent trading session, the candlestick representing today’s trading activity formed a four-price doji, a pattern that reflects market indecision.

This indecision suggests that even if a breakout occurs near this level, it may lack strong follow-through. As a result, price action may continue to fluctuate around the 106 zone for a while.

Additionally, the Japanese yen tends to strengthen during periods of heightened geopolitical tension. If such tensions persist, this could increase downside pressure on the pair, potentially leading to a downward price movement.

Make money without lifting your fingers: Start using a world-class auto trading solution.