AUD/JPY bears taking back control, eyes on key support at 70.06

AUD/JPY is currently trading at 70.55 within a tight range of 70.27 and 70.57 having found supply just a few pips shy of 71 the figure. The sentiment is fickle form one headline to the next and FX is fragile. AUD/JPY, as the FX space's risk barometer, has been unable to break through onto the 71 handle with markets torn between headlines surrounding the prospects of a COVID-19 vaccine and the health of the global economy. 

In overnight trade, Wall Street was pulling back on a report from Stat News which threw cold water over an upbeat study which had been released by Moderna about its coronavirus vaccine candidate. Consequently, stocks plummeted into the close: Wall Street Close: So much for the COVID-19 vaccine optimism. The news at the start of the week came from a Phase One study led by the National Institute of Allergy and Infectious Diseases. Moderna said it expects Phase Three trial initiation in July. The news had lifted markets and risk on was the name of the game.

However, the experimental nature of the test was soon said to not provide the critical data needed to assess its effectiveness, according to the health-focused Stat News report on Tuesday, citing experts. Consequently, the cross has run into offers ahead of the 71 handle. 

Issues noted by Stat included:

- a lack of data about the responses to the medicine from other participants in the 45-subject study

- lack of information about the ages of the eight subjects whose antibodies were analyzed, an important question given the virus is particularly lethal to older people

- lack of comment from Moderna's U.S. government partner on the vaccine, the National Institute for Allergy and Infectious Diseases

- the data is based on early responses to the vaccine, leaving unclear how long any immunity produced by the vaccine might last.

Moderna did not immediately respond to a Reuters' request for comment. The stock price took a beating and plummeted by 10.4% in late Tuesday action to almost pare back a 13% surge on Monday which brought it to a record close.

Commodities in focus

Meanwhile, donmestic factors, such as the jobs market and commodities are a focus.  the Australian labour market appears to have stabilised over the second half of April. "Weekly payroll data showed that job levels were a touch higher for the week ended 2 May than for the week ending 18 April. Total wages paid rose further, likely inflated by top-up payments for JobKeeper," analysts at ANZ Bank explained. ]

A plus for the Aussie is that sentiment in commodity markets remains positive as economies start to open up. oil has been a driver of the indexes in this regard.  According to Bloomberg’s sources on Monday this week, "China’s gasoline and diesel consumption are already back to the pre-virus levels—a bullish sign for the oil market, which is looking at China for clues about when demand in the rest of the world could return to some form of normality." The pent up demand on a global scale has seen Oil futures start the week off by posting their highest settlement in more than two months.

However, analysts at ANZ have argued that there are still doubts about the sustainability of the recent rally are emerging. "This pushed the ANZ China Commodity Index up 0.5% amid a choppy session. The bulk commodity sector led the complex higher, as iron ore and coking coal prices rose. The industrial metal sector was also stronger, led by gains in copper and nickel. Agriculture inched higher, with palm oil and cotton offsetting loses in soybeans and hogs. Precious metals increased, as gold and silver prices rose strongly."

AUD/JPY levels

70.06 is on the cards as a 38.2% Fibo which has a confluence with the late April tops and mid-May tops. If this area acts as support, bulls will be looking for entries and a continuation into the 71 and 72 territories. 72.50 will become a key target. 69.50 and a 61.8% Fibo retracement will otherwise be a prospect of a break below said support.