AUD/JPY struggles around 0.69 the figure, bears in control

AUD/JPY is currently trading at 69.07 within a tight range of 68.94 and 69.12 following a negative mid-week session which has seen the cross lowe the 70 handle and trade a cent lower. Risk-off tones are reverberating throughout the 24-hour FX market fueling a bid in the yen weighing on commodities and equities while consequently pressuring AUD lower. 

All FOMC participants were against negative rates

There are a number of elements stacking up against the cross, with the US dollar resurging across the board and progress in the Aussie. AUD/USD moved from the 0.6470s to 0.6450s via an advance to 0.6523 before falling to 0.6438. Federal Reserve's Chairman, Jerome Powell, reminded markets that negative rates were not an option, much to the displeasure and of US President Donald Trump.

The Fed intends to continue using tools it has already tried," Powell said in answer to questions at an event organized by the Peterson Institue for International Economics. "Previous minutes on negative rates debate says all FOMC participants were against them," Powell explained. However, despite this and a rally in the DXY, USD/JPY traded on the offer which in turn sent AUD/JPY lower as investors consider the anticipated recovery path.

Indeed, the economic reality of the coronavirus is turning the screw and the commodity sector is suffering significant losses, bar the precious metals sector. Trade wars are also starting to dig in following a mixed ake from markets at the start of this week. Australia’s call for an investigation into China’s role as the origin of the COVID-19 pandemic has upset the Chinese administration which has retaliated verbally and literally by imposing tariffs on Australian imports. More on this here. 

Looking forward

Meanwhile, today's calendar features Australia's April labour force survey risks as well as the NZ budget and US jobless claims - so plenty here for AUD/JPY traders to chew on and potentially tip the balance. 

Technically, the cross is moving into a topping formation, but it likely needs a fundamental confirmation to trigger the sell-off, while otherwise, those betting on reflation over the medium term will likely look to AUD as a justified hedge. However, the fundamental odds are well sacked against a smooth economic recovery all the while uncertainty prevails pertaining to COVID-19 and trade wars.

AUD/JPY levels

• Chart of the week: AUD/JPY looking ripe for a short - FXStreet