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AUD/JPY Forecast: Bullish on Yields and Energy Tailwinds: Top Trade Q1 2022

AUD/JPY Forecast: Bullish on Yields and Energy Tailwinds: Top Trade Q1 2022

Daniel McCarthy, Strategist


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AUD/JPY has spent 2021 in a wide trading range of 77.90 and 86.26.

While other central banks around the world have been withdrawing pandemic stimulus measures, both the Reserve Bank of Australia (RBA) and the Bank of Japan (BOJ) have maintained relatively loose policies. This is largely because inflation in both countries is not threatening economic stability.

The RBA will not meet again until early February and when they do, fourth quarter inflation data will be available. Many parts of the Australian economy re-opened in this quarter and it’s possible that some price pressures might be emerging.

This could be crucial for AUD/JPY, as Japanese investors have historically had a strong appetite for Australian fixed interest products when Australian yields are rising. The issue for AUD/JPY could be that it may underperform until there is movement from the RBA.

The Yen maintains a real yield advantage for now, but it is narrowing, and the pace of change could accelerate if the RBA turns hawkish.

As the Federal Reserve looks to raise rates in 2022, this raises the prospect of G-10 ex-Japan yields across the curve getting a boost. In this environment, the Yen may come under pressure more broadly.

The approaching Japanese winter may play a role in AUD/JPY as Japan are an energy importer, while Australia is an exporter of energy commodities. The RBA’s commodity index highlights the positive impact that surging energy prices is having on the Australian terms of trade. The increase in liquefied natural gas (LNG) and coal prices have more than compensated for the downturn in iron ore prices.


AUD/JPY tested the September low of 78.846 but the move was rejected. The 2021 low of 77.897 made in August remains intact.

Previous highs and pivot points may offer resistance above. While on the downside, previous lows and pivot points could provide support.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.