Key Technical Levels
If AUD/JPY drops below 110.00, it may test the 20-day simple moving average at 109.79. A further move lower could bring 108.80, the 23 February daily low, into focus. We are watching the AUD/JPY pair carefully after it rebounded strongly from its lows, showing resilience above the 110.50 mark. A decisive break above the 111.70 resistance is the key signal we are looking for to confirm a bullish continuation. This level represents the previous yearly high and clearing it would open the path towards the 112.09 target. The fundamental picture for the Aussie dollar remains supportive, which favors a potential upside move. Last year, in 2025, Australian inflation proved to be persistent, with the final quarter’s CPI coming in at 4.1%, discouraging any immediate rate cuts from the Reserve Bank of Australia. This interest rate advantage for the AUD over the JPY continues to be a primary driver for the pair. On the Japanese side, the volatility stems from uncertainty around the Bank of Japan’s next move. Since the BoJ ended its negative interest rate policy last year, we’ve seen markets become highly sensitive to any data that could signal another rate hike, such as recent wage growth figures trending around 2.3%. This underlying tension is causing the sharp, temporary flights to the Yen we saw in the last session.Options Strategy Ideas
Given the recent 250-pip trading range, implied volatility is likely to increase, making options an attractive strategy. We believe traders could consider buying call options with a strike price just above 111.70. This allows for participation in a potential sharp upward move toward 112.50 while defining risk to the premium paid. To manage the downside risk, a drop below the 110.00 psychological level would be a bearish signal. In this scenario, purchasing put options with a strike near the 20-day SMA at 109.79 could be a prudent hedge. This would offer protection if geopolitical concerns resurface and trigger another aggressive move into the safe-haven Yen. Create your live VT Markets account and start trading now.
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