AUD/JPY fails to cheer upbeat China Caixin PMI
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- AUD/JPY ignores the above-forecast China Caixin Manufacturing PMI.
- Upside capped by fiscal wrangling in the US and concerns that equity rally may be overdone.
The China-sensitive Aussie dollar is struggling to draw bids despite a better-than-expected China Caixin Manufacturing PMI released at 01:45 GMT. AUD/JPY continues to trade largely unchanged on the day near 75.53, having faced rejection at 75.80 early Monday.
The Caixin PMI, which focuses on small and medium-sized export-oriented units, rose to 52.8 in July from 51.8, beating the consensus estimate of 51.3. The uptick suggests an improvement in demand conditions in the global economy and is positive for equities and risk assets in general. So far, however, the data has failed to bring cheer to the AUD pairs.
The muted reaction could be associated with growing concerns that the US stock market rally may be overdone. Analysts at Societe Generale think the sharp recovery from the lows seen in March has occurred mainly due to government stimulus and misplaced optimism about coronavirus vaccines. Moreover, there is no guarantee that any of the vaccines under consideration will be effective on large scale, Societe Generale’s quantitative research noted., while adding that people won’t return to pre-coronavirus behavior any time soon.
In addition, a new US coronavirus stimulus package has stalled as Republicans and Democrats remain in a deadlock on how to extend a weekly boost to federal unemployment benefits that ended on Friday.
At press time, the futures tied to the S&P 500 are down 0.17%, while the Asian stocks are trading mixed. The AUD/JPY cross will likely face stronger selling pressure if risk aversion worsens.
Technical levels
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