AUD/JPY: Bears concentrate on geopolitics ahead of China data

  • Risk off rules market sentiment amid US-Iran tension and US-China trade woes.
  • China data-dump in the spotlight for fresh impulse.

Not only risk concerning the US-Iran war but likely trade tussle between the US and China also drags the AUD/JPY pair down to the fresh low since early-January nearing 74.68 amid early Friday trading session.

In addition to sluggish Australian data giving rise to speculations of Reserve Bank of Australia’s (RBA) another rate cut, the US-China trade tussle and recent noise relating to the blast of oil tanks in the Gulf of Oman also weigh on the prices.

The US says that Iran was behind the blast and has released a video showing their coast guards removing mines, as per the Reuters.

On a distant note, markets are also risk averse expecting a rate cut from the US Federal Reserve and slowdown of the global economy due to the trade war.

The global barometer of risk tone, 10-year US treasury yield, drops to 2.089% by the press time.

While China’s data is already in the pipeline, to be released at 07:00 GMT, investors may now focus on risk events concerning the US, China, and Iran in order to determine near-term trade direction.

China’s industrial production (YoY) is expected to increase to 5.5% from 5.4% while retail sales may rise to 8.1% from 7.2% during the month of May.

Additionally, April month industrial production from Japan (expected to remain unchanged at -1.1% YoY) can also play its role if flashing a deviation from market consensus.

Technical Analysis

Having slipped beneath 74.77, the pair is likely to decline further towards July 2016 low near 74.55 whereas the year 2016 bottom surrounding 72.45 could be next on the bears’ list.

Meanwhile, an uptick beyond 74.77 can pull the pair back to 75.20/25 area comprising multiple lows since January 04. Should there be additional upside past-75.25, 76.00 might come back on the chart.

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