AUD/JPY eases from 12-week high as stimulus hopes fade, vaccine optimism dwindle

AUD/JPY trims losses from the latest swing high near 77.30 during the early Friday morning in Asia. The pair surged to the highest since September 11 the previous day as expectations that the US covid stimulus is nearby and the hope of the coronavirus (COVID-19) vaccine propelled market optimism.

US President Donald Trump’s readiness to assent the US aid package, if passed by the Senate, fanned chatters concerning the much-awaited stimulus. However, the latest news that the US House Republican leader Mitch McConnell rejected the $908 billion proposal turn down the optimism.

On the other hand, Pfizer-BioNTech faces a major supply chain debacle, leading towards cutting the vaccine rollout target to half. The update poured cold water on the face of the market’s vaccine-led risk-on mood after the UK became the first Western country to approve emergency-use authorization for the vaccine.

Elsewhere, Brexit talks also falter as the UK claims that the European Union (EU) is hardening the negotiating stance, per The Guardian. Fisheries and a level playing field are the tough nuts to crack even as there is a little time before the deadline ends.

Also weighing the risks could be the surge in the US COVID-19 cases to the record daily high with over 200K new infections. The same calls for more local lockdowns from California and elsewhere in the US.

Against this backdrop, Wall Street benchmarks closed mixed after refreshing the record highs on Thursday whereas the US 10-year Treasury yields also drop 3.3 basis points to 0.913% by press time.

Moving on, the final reading of Australia’s October month Retail Sales, expected to confirm the initial 1.6% forecast, can offer immediate direction. However, the risk catalysts from vaccine updates, virus news and the stimulus headlines are likely to have an extra edge over the second-tier data while directing the pair’s moves.

Technical analysis

The pair’s pullback moves from the two-month-old ascending trend line, currently around 77.55, directs it towards an upward sloping support line since November 02, at 77.00 now. However, any downside break past-77.00 can derail the bullish momentum while highlighting the 21-day SMA level of 76.48 as immediate support.