AUD/JPY: Geopolitics at the helm, trends are contaminated and short-lived

AUD/JPY is a keen currency cross to watch at this time. The Hong Kong situation is blowing up towards international geopolitical risks which would throw the US and Chinese relations back on ice and do so just as fast as they have appeared to have been rescued in recent phone calls between US and Chinese officials in the last 24-hours. 

What's going on in Hong Kong could be far worse than Trump's tariff threats considering the Chinese are blaming the US for intervention which has escalated protests that started in June. Meanwhile, the Chinese communist party could severely escalate the problems before the National Day of the People's Republic of China on Oct 1st, wanting to crush the protestors before that special day of celebrations and a human rights scenario would likely result in UK/US and international scrutiny over the Chinese regime. There are reports that troops are headed to the border of Hong Kong.

There is sympathy for the protestors but mainland China must save face and can't give in to a demand that the protestors are asking for all the while Hong Kong businesses have been adversely affected since the protests began back in June.

What do the HK protestors want?

The extradition bill is what the protestors are fighting for and it was suspended by the territory’s chief executive, Carrie Lam, in mid-June, but protesters want it officially withdrawn. In addition to demanding Lam’s resignation, the protesters are calling for:

• The complete withdrawal of the proposed extradition bill.
• The government to withdraw the use of the word “riot” in relation to protests.
• The unconditional release of arrested protesters and charges against them dropped.
• An independent inquiry into police behaviour.
• Implementation of genuine universal suffrage.

Meanwhile, there has been some relief in risk following the reports that the US Trade Representative (USTR) Lighthizer's office in a published statement today had announced that additional tariffs on some Chinese imports, including cell phone and laptop computers, will be delayed until December 15. There were also reports that Chinese, U.S. chief trade negotiators held phone talks and Trump also hinted that China has agreed to buy more agricultural products all of which have given rise to a 1.89% jump in AUD/JPY on the day. However, any signs of further escalations of trade tensions coupled with the HK risk will likely flip this move right back over again.

AUD/JPY levels