Following the worst decline in a week, the AUD/JPY bears take a respite near the lowest level since June 22.
Market confidence is deteriorating as a result of the Fed’s confusing signals, Asia-Pacific covid troubles, and good US data.
In Asia, the China NBS Manufacturing PMI for June will be crucial, although macros will remain in control.
On a quiet Asian morning on Wednesday, the AUD/JPY maintains its 83.00 level. Due to Australia’s coronavirus (COVID-19) troubles and lackluster market sentiment, the cross-currency pair established a two-day downturn by revisiting the weekly low by the end of Tuesday. The most recent consolidation could be linked to concerns about critical data from Australia’s largest customer, China.
With nearly 4% of fully vaccinated Australians at risk of a widespread infection of the Delta covid strain, policymakers in Australia have imposed activity limitations on about 80% of the population. Despite this, the government has been chastised over inoculations and is looking for further signs of the pandemic, with one just discovered in Queensland.
Slower jabbing is the main risk of the virus’s reappearance in Indonesia, Malaysia, and Thailand, not to mention South Africa and Brazil.
Strong US consumer sentiment and housing data, meanwhile, appeared to support Fed Governor Christopher Waller’s hawkish comments on Bloomberg TV. “In support of tapering MBS before Treasuries,” Weller told Reuters, “tapering MBS is an easier sell to the public because the housing market is hot.”
It’s worth noting that US 10-year Treasury yields and Wall Street benchmarks have recently become sluggish as traders anticipate China’s June month PMI data as well as an early indication of Friday’s US Nonfarm Payrolls (NFP), namely US ADP Employment Change.
While projections point to another dismal result from Beijing, which will likely impact on the AUD/JPY exchange rate, any upside surprises could help consolidate recent losses.
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Aside from US and Chinese data, Japan’s covid troubles and challenges to the Bank of Japan’s loose money policies may potentially influence short-term AUD/JPY movements. However, as markets prepare for the Fed’s monetary policy tweaks, the focus will be on Friday’s US NFP report.
Unless the AUD/JPY crosses the 100-day SMA at 83.95, as well as the previous week’s peak near 84.25, the pair will be guided to the 83.30 horizontal support, which has been in place since mid-February.
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