AUD/JPY: Off intraday top on downbeat Aussie Retail Sales, cautious sentiment

• AUD/JPY drops as Australia’s December Retail Sales surprises with -4.2% figures.
• Japan’s CPI for December recovered but preliminary reading of Jibun Bank Manufacturing PMI for January dropped.
• Market sentiment sours as virus fears spread amid policymakers in the US, Europe, the UK and Japan.

AUD/JPY takes a U-turn from the intraday to 80.44 to currently around 80.40, up 0.08% on the day, following Australia’s Retail Sales release during early Friday. Also challenging the pair’s four-day uptrend is the recently cautious sentiment amid the coronavirus (COVID-19) worries.

The preliminary readings of Australia’s Retail Sales dropped below +7.1% prior to -4.2% in December. In doing so, the key release marks the heaviest fall since June 2020.

Read: Aussie Retail Sales arrives well below prior and estimates, AUD pressured

Earlier in the day, Australia’s Commonwealth Bank released initial figures for Manufacturing, Services and Composite PMIs for December. The figures suggested Manufacturing PMI rose to 57.2 versus 55.9 forecasts while Services PMI eased from 57.4 expected to 55.8. Even so, the Composite PMI gained from 55.6 to 56.00.

On the other hand, Japan also released December’s Consumer Price Index (CPI) and January’s preliminary data for Jibun Bank Manufacturing PMI. While the former recovered from -1.3% to -1.2% YoY, the later revisited the contraction area with 49.7 print versus 50.5 expected and 50.00 prior.

Other than the data, risk catalysts also weigh on the AUD/JPY prices. Not only US President Joe Biden’s worries over the further worsening of covid conditions but the administration’s fear of not matching the previous government’s upbeat promises on vaccines also triggered the virus woes. Following that, the European policymakers' push for tough lockdown measures joins their British counterparts’ demand to close down the national boundaries to tame the virus infection probed the bulls. Also, The Times said, “Japan govt has privately concluded Tokyo Olympics will have to be canceled because of coronavirus”, which in turn exerts additional downside pressure on the risks.

Amid these plays, S&P 500 Futures struggle for a clear direction near 3,850 after refreshing the record high the previous day. Further, stocks in Australia and Japan are mildly offered by press time.

Looking forward, AUD/JPY traders will have to keep their eyes on the virus updates and US President Biden’s next moves for fresh impulse.

Technical analysis

Sustained trading beyond 21-day SMA, at 79.89 now, precedes the double bottom flashed around 79.55/50, to challenge AUD/JPY bears. Alternatively, a downward sloping trend line from January 08, currently around 80.75, lures the pair buyers.