- AUD/JPY remains pressured around February lows after five-day downtrend.
- Market sentiment worsens amid concerns relating to Delta covid variant and Inflation.
- US-China tussles add colors to the risk-off mood.
- Japan’s National Core CPI, RBA Minutes and PBOC are key events in Asia.
AUD/JPY holds onto bearish sentiment, despite a recent pause around 80.30, near the five-month low amid early Tuesday morning in Asia. The quote dropped the most in over a week to refresh multi-day low as risk appetite sours amid the coronavirus (COVID-19) fears and reflation woes. Also roiling the mood could be the fresh US-China tussles.
Risk aversion dominates…
Although Tokyo reported below 1,000 covid numbers for the first time in six days, per Kyodo News, extended local lockdowns in Australia and six-month high infections in the UK recall the virus fears back to the table. This time, the concerns are graver as the Delta strain of the original virus spreads faster and resists vaccines. While identifying this, the US issued a “do not travel” advisory for the UK, per Reuters, whereas British PM announces 10-day self-isolation after getting in contact with someone infected with the disease.
The virus woes challenge the economic transition and drown markets, putting a safe-haven bid under the US dollar and Japanese yen of late.
Not only the fears of the virus but the reflation concerns in the US and economic pessimism in Japan, considering the pandemic resurgence, also weigh on the sentiment. Furthermore, the White House formally attributes malicious software activity over Microsoft Exchange to China and adds to the Sino-American tussles, offering another downer to the mood.
Amid these plays, Wall Street benchmarks slumped by the end of the Monday and so do the US 10-year Treasury yields, refreshing five-month low following the heaviest drop in eight months.
Given the AUD/JPY pair’s risk-barometer status, the risk-aversion could keep weighing on the quote. However, Japan’s National Consumer Price Index for June, expected -0.1% YoY for June, followed by the monetary policy meeting of the People’s Bank of China (PBOC) and the Reserve Bank of Australia’s (RBA) latest monetary policy meeting, will be crucial to follow for fresh impulse.
Although Japanese inflation data may offer little entertainment to the AUD/JPY bears, likely dovish comments in the RBA minute and the PBOC may keep the pair directed to the south.
Technical analysis
A clear downside break of 200-DMA, around 81.20 by the press time, directs AUD/JPY to the yearly low of 79.20.
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