AUD/JPY: Price consolidates ahead of phase-one signing

  • AUD/JPY holding in bullish territories ahead of signing oh phase-one deal between US and China. 
  • Risk appetite souring on news that there will be no rollback in tariffs. 

AUD/JPY is currently trading at 75.86 and sticking to a tight range in Asia while investors await the details of the 'phase-one' deal and signing ceremony today in the US session. Overnight, there were reports that there will not be a cut China in tariffs until after the Nov election which weighed on risk appetite. 

"The signing ceremony for the “phase one” US-China trade deal is due to take place at the White House (reportedly 11:30am NY time but not confirmed). China Vice Premier Liu He will represent China," analysts at Westpac explained.

The analysts at Westpac also highlight that markets will be looking for confirmation of newswire source reports on the scale of China’s pledged increases in purchases of US products. The default estimate is an extra $200bn of purchases over 2 years, compared to the 2017 baseline.

How might AUD/JPY react?

Wall Street retreated from intraday and record highs on the tariff news, but benchmarks did not collapse. Given that there has been little market reaction to the news that there will not be a rollback in tariffs, the confirmation of such could lead to a drop in risk appetite which would usually weigh on the cross. On the other hand, depending on the details and/or the willingness shown by both sides to progress and address the thornier issues in a second stage of talks,  we could see a positive outcome and a bid in AUD/JPY.

AUD/JPY levels

Price holds in a daily doji (bearish) above the 200-day moving around 74.90, scoring the high of 76.10, so far, since the breach. We have resistance around a confluence of the 23.6% Fibonacci retracement of the range since Aug 2019 and a bearish correction will target 74 the figure – being the vicinity of the June lows and a confluence of the 38.2% Fibonacci (range since Aug 2019 – 2019 trendline resistance/turns support). A bullish continuation, however, opens prospects to 76.20 and 77.20/50 in line with the 21-month moving average as the summit of the rising wedge formation. However, on further escalations, a greater support barrier (since GFC 2009) comes in at the 61.8% Fibonacci (range since Aug 2019) between 72 the figure and 72.50. 

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