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AUD/JPY drops to seven-day low following fresh risk aversion

  • AUD/JPY extends losses to the third consecutive day.
  • A mix of trade/political headlines gains strength from news concerning the spread of the virus in China to favor the risk-off.
  • BOJ, Aussie employment data in focus for near-term direction.

AUD/JPY declines to 75.40 during the early Tuesday’s trading hours. In doing so, the pair holds onto losses for the third day in a row amid a mix of trade/political headlines. The quote recently slipped heavily after the news broke that human transmission of China virus is confirmed after the fourth person died due to the same.

In order to strongly supervise the public movement and avoid unnecessary gatherings, Wuhan has set up the Wuhan Pneumonia control center in a reaction to the spread of disease in China.

The risk-aversion could also have gained clues from the World Economic Forum (WEF) in Davos wherein the International Monetary Fund (IMF) announced further weakness to the global economy during 2019 and 2020. However, expected mild recovery during the current year seems to have tamed the pessimism.

Furthermore, the weekend crisis in Libya is far from over as the Col. Khalifa Haftar refuses to respect the global push towards peace whereas the US and Britain are to take some of their troops back from Iraq to placate regional disputes.

While portraying the aforementioned catalysts, the US 10-year treasury yields trim nearly three basis points to 1.80%. It should be noted that the US traders begin the trading week today as they enjoyed Martin Luther King Day Holiday on Monday. Additionally, S&P Futures also drop 0.40% to 3,312 by the press time.

Looking forward, the monetary policy meeting of the Bank of Japan (BOJ) and its quarterly outlook, followed by Governor Haruhiko Kuroda’s press conference, will act as an immediate catalyst. The BOJ isn’t expected to alter present monetary policy and hence might turn out as the non-event.

Read: When is the BOJ rate decision and how could it affect USD/JPY?

On the other hand, Thursday’s Aussie employment data will be the key to watch after the latest bushfires. Forecasts suggest downbeat readings and hence any surprise to the upside can have stronger than expected reaction.

Technical Analysis

A 200-day SMA level of 74.71 seems to gain the market’s attention unless prices cross short-term falling trend line resistance, near 76.20.


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