AUD/JPY flat lines around 99.00; seems vulnerable amid China's economic woes

AUD/JPY is seen consolidating the previous day’s heavy losses to a two-week low.
Spot prices react little to unimpressive Chinese trade data amid trade uncertainties.
Bets for an imminent BoJ interest rate hike underpin the JPY and favor bearish traders.

Haresh Menghani FXStreet

The AUD/JPY cross oscillates in a narrow trading range, around the 99.00 mark during the Asian session on Friday, and remains within striking distance of a two-week low, retested the previous day. Meanwhile, the fundamental backdrop seems tilted in favor of bearish traders and backs the case for an extension of the recent pullback from the 101.20 area, or the year-to-date high, touched in October.

Data released earlier today pointed to signs of cooling private consumption in Japan, which, along with Japan's new Prime Minister Sanae Takaichi's pro-stimulus stance, could allow the Bank of Japan (BoJ) to resist policy tightening. This holds back traders from placing fresh bullish bets around the Japanese Yen (JPY) and acts as a tailwind for the AUD/JPY cross. However, minutes of the BoJ's September policy meeting, released on Wednesday, kept hopes alive for an imminent rate hike.

Apart from this, a generally weaker tone around the equity markets offers some support to the safe-haven JPY and undermines the risk-sensitive Aussie. Meanwhile, the disappointing release of Trade Balance data from China suggested weak domestic demand in the world's second-largest economy amid trade-related uncertainties. Moreover, the lack of any major hawkish surprise from the Reserve Bank of Australia (RBA) weighs on the China-proxy Australian Dollar (AUD).

The aforementioned factors validate the near-term negative outlook and suggest that the path of least resistance for the AUD/JPY cross remains to the downside. Some follow-through selling below the 98.80 region, or the weekly through, will reaffirm the negative bias and pave the way for a fall towards testing sub-98.00 levels.

Economic Indicator

Trade Balance CNY

The Trade Balance released by the General Administration of Customs of the People’s Republic of China is a balance between exports and imports of total goods and services. A positive value shows trade surplus, while a negative value shows trade deficit. It is an event that generates some volatility for the CNY. As the Chinese economy has influence on the global economy, this economic indicator would have an impact on the Forex market. In general, a high reading is seen as positive (or bullish) CNY, while a low reading is seen as negative (or bearish) for the CNY.

AUD/USD slips below 0.7000 as RBA hike fails to offset US election woes

The Aussie Dollar drifts lower against the US Dollar late on Tuesday as the US midterm elections are underway, while progress toward a potential diplomatic exit from the US-Iran war stalls after Iran denied claims it was close to a deal. The AUD/USD trades at 0.6965, down 0.44%.

USD/JPY fails near 159.00 amid weak USD, intervention risks

USD/JPY edges lower during Tuesday’s Asian session, reversing part of the previous day's gains to 158.00 as the US Dollar remains depressed amid hopes for Iran diplomacy and ahead of US midterm elections. Meanwhile, intervention risks support the Japanese Yen, though the uncertainty over the timing of the next BoJ rate hike caps gains. This keeps the pair confined within a familiar range and warrants caution before placing directional bets.