AUD/JPY continuing Wednesday's drop, backing into the 83.50 handle
|- Soured risk sentiment, dovish RBA keeping the Aussie on the backfoot.
- China data at 02:00 GMT could produce some knock-on volatility.
The AUD/JPY is continuing to decline in Asia trading and is under yesterday's low and testing into the 83.45 area.
The Aussie lifted early in Wednesday's trading but tumbled back on soured risk appetite. Consumer Inflation came in at 3.7% compared to the previous 3.6%, a move that reflects the overall growth prospects for the Australian economy: good, but not good enough. The Reserve Bank of Australia (RBA) is also out with their quarterly bulletin, but with most of the data contained in the bulletin already in the market's hands over the quarter, reaction will likely be mild and the RBA is widely expected to hold tight to their current policy outlook, and it is unlikely that the RBA will be moving on interest rates anytime soon, as Australia's lagging economic growth leaves the central bank in a holding pattern amidst tenuous levels of household debt keeping a lid on consumer spending.
Chinese figures for Foreign Direct Investment at 02:00 GMT today could produce encourage some movement in the Aussie, as more eyes than usual will be watching China closely given Trump's recent steel and aluminum tariffs, and threats of seeking another $60B in additional duties that are aimed squarely at Chinese exports. Continued saber-rattling is beginning to look like the lead-up to a full-on trade war, and market sentiment has been left subdued by the political turmoil, keeping risk-based assets like the AUD in a weakened position against safe-havens like the JPY and the USD.
Foreign Bond Investment showed a surprising amount of uptake, with the figure coming in at ¥1090B versus the previous ¥-1,188.5B. Markets are sedated at the start of the Tokyo session, but an upswing in foreign investment in Japanese bonds is a sure sign that traders are nervous about the state of global markets despite positive figures from most developed countries and overall positive outlooks on economic activity across the globe. Japan is also suffering from its own risk-off events, namely the political scandal that has mired Japan's Finance Minister, Taro Aso, who appears to have forged documents related the sale of government land to a school operator at a steep discount with ties to the Prime Minister's wife. Documents were modified to strike the names of the Prime Minister, Shinzo Abe, and his wife from them. Though the impact of Japan's political strife is wearing off, markets are having trouble finding reasons to return to the risk table for more, and safe havens continue to prop up on hesitant sentiment.
AUD/JPY Technicals
The pair is losing its nerve after rebounding from a one-year low of 81.48 in early March, and this week the AUD/JPY has bounced neatly off of resistance from the 34 EMA currently at 84.40. The pair is close to support from the 38.2 Fibo level at 83.36, and a break lower will see further support from the 50.0 Fibo level at the 83.00 major psychological handle.
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