Citigroup has revised its outlook for the Australian Dollar/Japanese Yen (AUD/JPY) currency pair, stating that the upside potential is now limited after the pair reached its projected technical target. According to Citi’s latest analysis, the AUD/JPY pair may be entering a period of consolidation or mild correction as several fundamental and technical indicators suggest weakening bullish momentum.
Recent Performance and Technical Picture
The AUD/JPY pair has seen a notable run-up over recent months, largely supported by improving risk sentiment and expectations for stronger economic growth in the Asia-Pacific region. However, as of early April 2025, the pair has met Citi’s previously forecasted price objective, prompting a more cautious stance going forward.
Citi notes that AUD/JPY has approached strong resistance near the 100.00 level — a psychologically significant barrier that aligns with previous highs. The currency pair is now trading slightly below its recent peak, signaling that upward momentum is beginning to fade.
From a technical standpoint:
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The 14-day Relative Strength Index (RSI) is hovering near overbought territory, indicating a potential pullback or sideways consolidation.
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The pair is still holding above its 50-day moving average, but momentum indicators such as the Moving Average Convergence Divergence (MACD) are beginning to flatten.
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Citi analysts also point to deceleration in bullish volume, suggesting that fresh buying interest is waning as the pair reaches valuation extremes.
Key Drivers Behind the Shift in Sentiment
Several macroeconomic and geopolitical factors are contributing to Citi’s more neutral-to-cautious outlook on AUD/JPY:
1. Bank of Japan’s Policy Normalization
The Japanese Yen has been gradually strengthening in anticipation of a shift in the Bank of Japan’s ultra-loose monetary policy. Market participants are increasingly pricing in the possibility of a modest rate hike by the BoJ later this year — a move that would support the yen and potentially weigh on AUD/JPY.
Even though Japan’s economic recovery remains fragile, recent inflation prints and a tighter labor market have increased speculation that policymakers may begin tapering stimulus, which could limit further upside for this pair.
2. Australia-China Trade Exposure
The Australian Dollar is heavily influenced by developments in China, its largest trading partner. Although recent Chinese stimulus measures — including infrastructure spending and monetary easing — have buoyed Australian exports, concerns remain about the sustainability of China’s economic rebound.
Any sign of slowing demand or renewed trade friction could dampen sentiment for the AUD, creating headwinds for AUD/JPY.
3. Shifting Risk Appetite and Global Volatility
AUD/JPY is a classic risk-sensitive currency pair, often used as a barometer of global investor confidence. Geopolitical tensions, especially involving major economies like the U.S. and China, could prompt risk aversion in markets. In such scenarios, the yen typically gains on safe-haven flows, while the Aussie weakens — a bearish setup for AUD/JPY.
Citi’s Forward Guidance
Citi advises traders to be cautious with long positions in AUD/JPY, especially as the pair approaches historically strong resistance levels. The firm does not rule out the possibility of minor gains, but sees limited upside unless there is a major catalyst, such as unexpectedly strong economic data from Australia or a dovish shift by the BoJ.
Short-to-medium term, Citi forecasts AUD/JPY to trade within a broad range of 96.00 to 100.00, with potential downside risks increasing if risk sentiment deteriorates globally or if Japanese yields rise more sharply than expected.
Conclusion
While AUD/JPY has performed well over recent months, Citi’s analysis suggests the rally may have run its course — at least for now. With technical targets met and macro risks mounting, the bank sees little justification for aggressive long positions at current levels. Traders and investors are urged to monitor developments in central bank policy, commodity prices, and Asia-Pacific economic data closely in the coming weeks.
