AUD/JPY: Pullback from session highs continues after mixed China data

AUD/JPY fell from 69.33 to 69.26 following the release of the China data at 1:30 GMT, extending the pullback from the session high of 69.53 observed in early Asia. 

China’s Industrial Production rose 3.9% year-on-year in April versus expectations for a 1.1% rise and up from March’s -1.1% reading. While factory activity expanded at a faster pace, consumer spending, as represented by Retail Sales, again declined. 

Retail Sales dropped by 7.5% in April versus expectations for a 7% drop, having declined by 15.8% in the preceding month. The AUD, therefore, is having a tough time cheering the uptick in China's Industrial Production. 

Downside pressures could also be emanating from the risk-off tone in the US stock futures. At press time, the futures tied to the S&P 500 are down 0.30%. The index futures were up nearly 0.20% in early Asia. 

Wall Street put in a positive performance on Thursday in hopes of an additional fiscal stimulus package. White House’s advisor Larry Kudlow was out on the wires late Thursday, stating that the American economy could witness a “V-shaped” recovery. The policymaker, however, said that the President is not in favor of a general stimulus package but more inclined to provide aid to states related to pandemic. 

Kudlow’s comments likely took the wind out of the S&P 500 futures and growth-linked currencies like the Aussie dollar. The AUD/JPY pair could suffer deeper losses if the risk-of tone seen in the US stock futures permeates into the Asian indices, which are currently trading mixed. 

While Australia is looking to reopen its economy, recession fears are on the rise and could weigh on thee AUD. The big four Australian banks – Commonwealth Bank, Westpac, National Australia Bank and ANZ Bank – have pencilled in almost $5 billion in provisions for bad and doubtful debts caused by the pandemic and are prepared for recession, according to The Sydney Morning Herald. 

Technical levels