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AUD/JPY Bounces Back as Disappointing Japanese GDP Dents BOJ Hike Bets
Traders' Opinions
Summary:
The Australian Dollar staged a recovery against the Japanese Yen on Monday, snapping a four-day losing streak after a weaker-than-expected GDP report from Japan cast doubt on the Bank of Japan's timeline for policy normalization.
Buy
PENDINGAUDJPY
EXP
108.800
Entry Price
113.500
TP
107.600
SL
108.595 +0.628 +0.58%
--
Point
PENDING
107.600
SL
CLOSING
108.800
Entry Price
113.500
TP
The Australian Dollar is clawing its way back against the Japanese Yen to start the trading week, capitalizing on a significant shift in monetary policy expectations emanating from Tokyo. Following a disappointing reading on Japan’s economic growth, the AUD/JPY cross has climbed back into the mid-108.00s during the Asian session, temporarily halting a four-day slide that had pushed the pair to its lowest point in nearly two weeks.
The primary catalyst for this move was the latest Gross Domestic Product (GDP) data released by Japan’s Cabinet Office earlier Monday. While the economy technically emerged from contraction, posting 0.1% growth in the fourth quarter of 2025 compared to the previous -0.7% reading, the figure fell short of market forecasts. This underwhelming rebound has immediately tempered market expectations for an imminent hawkish pivot from the Bank of Japan (BoJ). With the world’s third-largest economy showing fragility rather than robust momentum, traders are paring back bets that the BoJ will rush into a series of aggressive rate hikes, thereby undermining the Japanese Yen and providing a natural lift to the cross.
On the other side of the equation, the Australian Dollar is proving resilient, buoyed by a distinctly hawkish undertone from the Reserve Bank of Australia (RBA). Comments from RBA Governor Michele Bullock continue to resonate through the markets; her explicit warning that the central bank stands ready to raise interest rates again if inflation proves entrenched has effectively ruled out any near-term dovish pivot. This sentiment was reinforced by RBA Assistant Governor Sarah Hunter, who noted that inflation is expected to remain stubbornly above the 2%-3% target band for an extended period, while the labour market remains surprisingly stable.
Adding further fuel to the Aussie’s fire is the persistent hope for additional fiscal and monetary stimulus out of Beijing. As a proxy for Chinese economic sentiment, the Antipodean currency often benefits from expectations that Chinese policymakers will step in to support their faltering recovery. This external dynamic is providing an additional tailwind, making the AUD/JPY cross an attractive play for yield-seeking investors.
Technical Analysis
From a technical perspective, AUD/JPY remains embedded within a well-defined bullish structure on the 4-hour chart, with price action continuing to respect a rising trendline that has guided the advance since late November. The broader sequence of higher highs and higher lows remains intact, reinforcing the medium-term upside bias despite the recent corrective pullback.
Prices are currently consolidating just above the ascending trendline support near the 108.00–108.20 zone, following a sharp rejection from the 110.80–111.00 resistance area. The recent pullback has unfolded within a short-term descending corrective channel (or flag formation), suggesting a pause within the broader uptrend rather than a structural reversal. Importantly, buyers stepped in precisely at the confluence of the rising trendline and horizontal support, signaling that dip demand remains active.
The 108.00 psychological level now serves as a critical pivot. A sustained break below this threshold, particularly if accompanied by a decisive move under the rising trendline, would mark a notable deterioration in market structure. Such a breakdown could expose the 106.80–107.00 region, where prior consolidation and breakout acceleration occurred. A deeper move below 106.50 would shift the outlook toward a broader corrective phase, potentially targeting the 105.00 handle.
On the upside, bullish traders are focused on a clean break above 110.80–111.00, the recent swing high and key resistance band. A sustained push through this barrier would confirm trend continuation and likely accelerate momentum toward the 113.50–114.00 zone, aligning with the projected measured move shown on the chart. A breakout above 114.00 would signal a fresh impulsive leg higher and reinforce the strength of the prevailing uptrend.
Structurally, the pair is compressing between rising dynamic support and descending corrective resistance — a classic continuation setup. As long as price holds above the ascending trendline and maintains higher lows, the broader bullish framework remains valid. The recent pullback appears orderly rather than impulsive, supporting the case that the move is corrective in nature.
Overall, AUD/JPY maintains a bullish bias while trading above 108.00 and the rising trendline, with consolidation likely preceding the next directional breakout.
TRADE RECOMMENDATION
BUY AUD/JPY
ENTRY PRICE: 108.80
STOP LOSS: 107.60
TAKE PROFIT: 113.50
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