The Japanese yen has continued to weaken, but market positioning is increasingly one-sided. With the Bank of Japan expected to signal a reduction in JGB purchases — or potentially hint at another rate hike — the risk of a hawkish surprise is underpriced. Meanwhile, the Australian dollar is vulnerable to a broader risk-off shift, particularly if the US-EU tariff situation escalates or bond markets struggle to absorb upcoming supply.

AUD/JPY looks stretched technically and fundamentally. Yield differentials still favour AUD, but if BoJ guidance shifts next week or risk sentiment deteriorates on poor Treasury auction outcomes or rising geopolitical stress, the pair could correct sharply. This is a contrarian long-JPY idea, in line with your strategic approach to trading against crowded positioning.

SHORT AUDCJPY

Jun 11 2025

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