AUD/JPY ticks higher as Japan enters recession, S&P 500 futures rise

AUD/JPY ekes out gains in Asia as the US stock futures trade in the green.
Japan entered an economic recession in the first quarter.
Equities remain bid, keep Yen on the offer despite weak data, as Fed's Powell reiterates readiness to do more.

Omkar Godbole FXStreet Contributor

The AUD/JPY pair is reporting marginal gains during Monday's Asian trading hour amid an increasing disconnect between the equity market performance and the lived economic reality.

Japan’s economy contracted at an annualized rate of 3.4% in the first quarter following a revised 7.3% contraction in the final three months of 2019, government data showed on Monday.

Japan has officially entered a recession with the consecutive quarterly economic contractions. Even so, the futures on the S&P 500 are gaining altitude and keeping the Japanese yen, a safe haven, on the defensive. At press time, the US index futures are up 0.83% and the AUD/JPY is trading at 68.87, representing a more than 20-pip gain on the day.

The disconnect between the economic reality and the stock markets could be associated with the comments by the latest Federal Reserve's Chairman Powell that the central bank hasn't run out of ammunition yet and could do more if required. Moreover, the Fed and other major central banks have injected unprecedented amounts of liquidity over the last past two months, helping equities stay bid despite mounting risks of a coronavirus-led global deflationary crash.

Looking ahead, the liquidity-driven rally in the US stocks could come to a screeching halt due to renewed friction between the United States and China over the virus outbreak. The Trump administration stepped up its anti-China rhetoric over the weekend, with a top aide suggesting Beijing sent airline passengers to spread the infection worldwide.

Technical levels

1. R3 70.12
2. R2 69.83
3. R1 69.24
PP 68.95
1. S1 68.36
2. S2 68.07
3. S3 67.49

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

EUR/USD climbs to daily highs near 1.1820

EUR/USD now picks up pace and advances to the area of daily peaks north of the 1.1800 barrier at the end of the week. The pair’s decent move higher comes against the backdrop of a generalised lack of direction in the FX galaxy and the mild offered stance in the US Dollar.

GBP/USD trims losses, retests 1.3460

After briefly challenging its key 200-day SMA near 1.3440, GBP/USD now manages to regain some balance and revisit the 1.3460 zone on Friday. Cable’s pullback comes as the selling pressure on the Greenback gathers traction, reigniting some recovery in the risk-linked space.

Gold flirts with four-week highs past $5,200

Gold extends its rebound, climbing for a third consecutive session and pushing back above the $5,200 mark per troy ounce on Friday. The move higher continues to draw support from lingering geopolitical tensions and the ongoing uncertainty surrounding US trade policy, both of which are keeping safe-haven demand firmly in play.

Bitcoin, Ethereum and Ripple consolidate with short-term cautious bullish bias

Bitcoin, Ethereum and Ripple are consolidating near key technical areas on Friday, showing mild signs of stabilization after recent volatility. BTC holds above $67,000 despite mild losses so far this week, while ETH hovers around $2,000 after a rejection near its upper consolidation boundary.

Changing the game: International implications of recent tariff developments

The Supreme Court ruling on International Emergency Economic Powers Act (IEEPA) tariffs provides limited relief for the rest of the world, with weighted average tariff rates modestly lower.

Starknet unveils strkBTC, shielded Bitcoin transactions on Ethereum Layer 2

Starknet, the Ethereum Layer 2 network developed by StarkWare, today announced strkBTC, a wrapped Bitcoin asset that introduces optional shielding while preserving full DeFi composability.