AUD/JPY: Directionless above 75.00 ahead of Australia Q2 inflation data

• AUD/JPY wavers in the choppy range above 75.15.
• Risk-tone remains mildly positive despite dimming hopes of US stimulus.
• Vaccine news, Fed’s action seem to favor the optimists ahead of the key Aussie numbers.
• The pre-Fed trading lull, risk reset can bore the market players.

AUD/JPY trades near 75.20 during the pre-Tokyo open Asian session on Wednesday. The pair has been taking rounds in nearly a 10-pips range off-late. While the latest shift in market’s risk-tone sentiment should have ideally helped the quote snap its previous four-day losing streak, bulls area waiting for Australia’s second quarter (Q2) Consumer Price Index (CPI) numbers for fresh impulse.

The US Federal Reserve’s (Fed) extension of stimulus deadline and President Donald Trump’s push to the coronavirus (COVID-19) vaccine hopes fail to defy the uncertainty surrounding the American fiscal package. Be it House Speaker Nancy Pelosi or White House Chief of Staff Mark Meadows, both are against the market expectations of any quick results on phase 4 fiscal package. The importance of the delay becomes alarming as unemployment claim benefits are expiring this week.

About the virus, wave 2.0 of the pandemic is getting bitter day by day. US cases rose past-4.0 million whereas Victoria, China and Spain have recently shown worrisome signs. Amid the pessimism, US President Trump tries to pitch for Americans deal with Kodak Pharmaceuticals whereas Moderna also offered details of its plans to provide the vaccine.

Not only the virus and politics, but Sino-American tensions are also weighing on the quote. The Trump administration’s crackdown on Beijing’s Hong Kong security bill gains support from the major West countries. However, the dragon nation keeps fighting against the world to prove it is right, which adds weakness to the risk-barometer AUD/JPY.

While portraying the market sentiment, Wall Street marked a negative day whereas the US 10-year Treasury yields also slipped below 0.60%. Even so, S&P 500 Futures seesaw around 3,215, up 0.10%, by the press time.

Other than the risk catalysts, Aussie CPI data will be the key for the pair traders. Although forecasts suggest the inflation numbers remain dismal, mainly due to the pandemic effect   in Q2, markets may ignore the pessimism during the anticipated risk-reset.

Read: Australian RBA’s Quarterly Inflation Preview: Shrinking to record lows

Technical analysis

An upward sloping trend line from June 22, at 75.10 now, quickly followed by a 21-day SMA level of 75.02, are the key near-term support for the bears to conquer before targeting the monthly low under 74.00. On the contrary, a 10-day SMA level of 75.45 restricts the quote’s immediate upside.