AUD/JPY retreats towards 94.00 on downbeat Aussie trade numbers and hawkish concerns about BoJ

AUD/JPY justifies downbeat Australia data, as well as slightly hawkish bias about the Bank of Japan (BoJ), amid early Thursday’s risk aversion as it drops to 94.10 by the press time. In doing so, the cross-currency pair prints a three-day losing streak while also justifying the sluggish yields.

Australia’s trade surplus shrinks to 8,039M versus 10,000 expected and 11,321M prior. Further details reveal that Australia's July Goods/Services Exports reprint -2.0% figures on a monthly basis. That said, the country’s July Goods/Services Imports rose 3% MoM vs. -4.0% booked in June.

On the other hand, BoJ policymaker Junko Nakagawa initially defended the easy monetary policy by stating that it is appropriate to maintain the easy monetary policy for the time being while adding that they’re still not at the stage where we can say Japan has stably, sustainably achieved BoJ price target.

It’s worth noting that the fears about China's slowdown and optimism surrounding the US and Japan, not to forget concerns suggesting economic fears for Australia, together weigh on the sentiment and the AUD/JPY prices due to the quote’s risk-barometer status.

On Wednesday, Australia’s second quarter (Q2) Gross Domestic Product (GDP) rose to 0.4% QoQ versus 0.3% marked expectation and 0.2% prior readings but the yearly figures eased to 2.1% YoY from 2.3% previous readouts, versus the analysts’ estimations of 1.7%.

China’s early-week disappointment via China Caixin Services PMI joined the market’s lack of confidence in the Dragon Nation’s stimulus to weigh on the concerns about Beijing. On the same line could be the US-China tension surrounding the trade conditions and Taiwan.

On the other hand, Japan’s top currency diplomat Masato Kanda and Chief Cabinet Secretary Hirokazu Matsuno both mentioned watching the moves with a high sense of urgency on Wednesday. The policymakers also added that they would respond to the moves appropriately if necessary without ruling out any option.

Further, Bank of Japan (BoJ) board member Hajime Takata defended the central bank’s easy policy by citing very high uncertainty on the outlook. “BoJ will closely watch market developments to achieve bond market stability with eye on benefits, de-merits of YCC,” added the policymaker. BoJ’s Takata also cited stronger-than-expected US economic growth to justify the US Dollar strength while adding that there’s a certain distance to the ditching of negative rate policy.

Against this backdrop, the US 10-year Treasury bond yields struggle to extend the previous day’s run-up at a two-week high while the S&P 500 Futures remain pressured at the latest.

Moving on, China trade numbers for August and Philip Lowe’s last speech as the Reserve Bank of Australia (RBA) Governor will be important to watch for clear directions.

Technical analysis

AUD/JPY remains pressured between a one-week-old descending resistance line and an ascending support line stretched from late July, respectively near 94.55 and 93.75.