AUD/JPY stays on the front foot with US-China announcements favoring risk-on

  • AUD/JPY rises to fresh six-week high amid trade optimism.
  • The US-China efforts to boost risk sentiment take over Aussie/Japan data.

With a slew of trade positive headlines from the US and China, AUD/JPY surges to fresh six weeks high of 74.33 before pulling back to 74.28 by the press time of early Thursday.

The US President Donald Trump’s 15-day leeway to China’s $250 billion worth of goods, before levying them the increased tariff rates, shows the Trump administration’s response to China’s latest trade positive measures including the release of good’s list that will be off excess duties and Vice Premier Li’s optimism. An additionally trade welcome news came from Taiwan that agreed to buy $3.6 billion of the US agricultural products.

As a result, the quote largely shrugged off Japan’s upbeat Machinery Orders for July and Australia’s weaker than previous Consumer Inflation Expectations for September.

Though, the pair is yet to overcome the market fears surrounding the key data/events lined up for publishing during the rest of the day. Among them, monetary policy meeting by the European Central Bank (ECB) and the US Consumer Price Index (CPI) data will be the key to watch.

In a reaction to market sentiment, the US 10-year Treasury yield, generally considered as a barometer to risk tone, surges to a fresh high in a month’s time to 1.752% whereas MSCI’s Asia Index (ex-Japan) and S&P 500 Futures also portray the risk improvement.

It should also be noted that trade/political headlines will keep directing near-term market sentiment, even amid the top-tier events.

Technical Analysis

The pair needs to offer successful trading beyond 74.05/15 region, comprising 38.2% Fibonacci retracement of April-August declines and June 20/21 low, in order to aim for 100-day exponential moving average (EMA) around 74.60 and 50% Fibonacci retracement close to 75.35. If the quote fails to clear aforementioned key resistance area, 50-day EMA level of 73.30 and 23.6% Fibonacci retracement level of 72.50 will come back on the chart.

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