AUD/JPY drops below key support as S&P downgrades outlook for Australia

AUD/JPY is losing altitude at press time, as a decision by a prominent rating agency to downgrade Australia's outlook is drawing offers for the Aussie dollar.

The currency pair is currently trading near the ascending 50-hour moving average at 66.62, representing a 0.73% drop on the day. The spot hit a session low of 66.47 soon before press time. 

Standard & Poor's, one of the big three ratings agencies, put Australia's AAA credit rating on a downgrade watch on Wednesday by revising the country's outlook to negative, citing substantial deterioration in the nation's finances and the increased risk of deeper economic recession due to the coronavirus outbreak. 

Australia recently announced a fiscal stimulus, which is reportedly 11% of its gross domestic product. The Reserve Bank of Australia cut rates to 0.25% last month and launched a yield curve control program. Even so, fears of a deeper economic downturn continued to rise. 

Apart from the S&P decision to downgrade Australia's outlook, the waning risk sentiment seems to be adding to bearish pressures around the AUD/JPY pair. The futures tied to the S&P 500 futures are reporting a 0.53% drop at press time. The index closed Tuesday with marginal losses, having jumped by 7% on Wednesday. 

The renewed risk-off could be associated with increasing coronavirus cases in the US. The world's largest economy recorded 1736 new coronavirus deaths on Tuesday, the highest in a single day, pushing the nationwide tally to 12,722, according to John Hopkins University. 

Technical levels