The AUD/JPY currency pair has experienced a notable rise, climbing approximately 0.3% to trade near 106.46 during the European trading session. This upward movement occurs amidst ongoing weakness in the Japanese Yen, which is underperforming relative to other major currencies. The decline in the Yen is influenced by political developments in Japan, notably the anticipated dissolution of the lower house of parliament by Prime Minister Sanae Takaichi later this month.
Reports suggest that Takaichi has indicated her intention to dissolve parliament at the start of its upcoming session, beginning January 23. Such a move has heightened expectations of an early snap election, which markets believe could lead to a significant electoral victory for the ruling party. These prospects have fueled optimism around increased fiscal stimulus efforts by the Japanese government. However, if larger spending initiatives are implemented, they might conflict with the Bank of Japan’s current stance on monetary tightening, potentially constraining Yen strength.
Investor attention is also turning toward China’s upcoming trade data for December, scheduled for release soon. Market participants are awaiting the figures to gauge the country’s economic trajectory and its potential impact on regional currencies, including the Australian Dollar.
From a technical perspective, the AUD/JPY pair remains on an upward trajectory, with the price trading above the 10-week exponential moving average at 103.85. This level supports the current bullish trend and suggests that pullbacks may be limited. However, the Relative Strength Index stands at approximately 79.39, indicating overbought conditions. While this suggests some risk of consolidation, the bullish bias is likely to persist as long as the pair remains above its short-term support. A close below the 10-week EMA could signal a potential correction, opening the door for further retracement in the near term.
