AUD/JPY bounces-off 71.25 amid looming US-China trade uncertainty

The AUD/JPY pair is seen staging a comeback from a drop to 71.25 levels amid a sudden turnaround in the risk sentiment, as the European equities turn positive. However, the rebound lacks follow-through as the Treasury yields continue to bleed, implying that the US-China trade tensions continue to loom.

China’s consumption boost offers support

Over the last hour, the cross reversed course and resumed Monday’s upbeat momentum, after the risk sentiment got a bit of a lift from China’s State Council’s plan to boost the consumption, in the face of mounting trade risks on the economic growth.

China is considering relaxing and withdrawing certain restrictions on auto purchases as well as actively support new-energy vehicle purchases while encouraging credit support for purchases of new energy vehicles and smart home appliances.

Despite the latest leg up, the risk barometer, AUD/JPY remains under pressure, as the doubts over the US-China reconciliation on trade continue to keep the trade war fears alive. Beijing casts doubt on state of trade talks after Trump says it wanted a deal - SCMP

Further, the latest positive developments on the US-Japan trade front adds to the bullish tone seen around the Japanese currency, keeping the bearish bias intact. Meanwhile, the Aussie remains pressured by the recent dovish comments from the Reserve Bank of Australia’s (RBA) Deputy Governor Debelle, as he said that he left doors open for unconventional monetary policy options, if the rates fall to around 0.5%.

All eyes now remain on fresh US-China trade-related headlines and the sentiment on the Wall Street for the next direction. Also, the US CB Consumer Confidence gauge and Australian Construction Output data will be closely eyed.

AUD/JPY Technical levels to watch