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  • AUD/JPY pays little heed to the upbeat China Caixin Manufacturing PMI.
  • The early-Asia statistics from Australia and Japan flashed mixed signals.
  • Market sentiment changes the tone from previous optimism to cautiously optimistic, thanks to China and virus woes.

AUD/JPY drops to 74.50 amid the Asian session on Wednesday. The pair recently took a U-turn from a two-week high while ignoring better than forecast China data. In doing so, the quote seems to respect the initial updates from Australia and Japan amid cautiously optimistic markets.

China’s June month Caixin Manufacturing PMI followed the footsteps of official activity data during the early Wednesday. The private PMI figures crossed 50.5 forecast and 50.7 prior with 51.2 mark. Following the data, AUD/JPY extends its pullback moves rather than respecting the trade-positive sign.

Earlier during the day, Australia’s May month Building Permits data contrasted with the initial Asian session June month activity numbers from the AiG and the Commonwealth Bank. On the other hand, Japan’s downbeat figures of the Tankan survey for the second quarter (Q2) overruled Jibun Bank Manufacturing PMI’s upbeat readings.

Looking at the risks, the market’s earlier positive mood seems to welcome the third quarter with a cautious note. The reason could be traced from the rising coronavirus (COVID-19) numbers from the US and the Sino-American tussle. While pandemic figures from America crossed 40,000 to mark the fifth day of the rise in the last six during Tuesday, China’s passage of the Hong Kong security law renews the political tussle among the global leaders.

Against this backdrop, the US 10-year treasury yields extend Tuesday’s gains with a rise of three basis points (bps) to 0.682%. Though, S&P 500 Futures seems to buck the trend while declining to 3,085, down 0.20% on a day after marking the best quarter since 1998.

Considering the lack of major data left to publish ahead of the busy US session, the pair traders are likely to keep eyes on the risk catalysts for fresh impulse. While doing so, the virus news and the US-China updates will gain major attention than the others.

Technical analysis

While overbought RSI conditions on the four-hour chart suggest the pair’s pullback towards revisiting Thursday’s top near 73.90, a seven-day-old rising channel keeps the buyers hopeful unless the quote slips below 73.60. However, 75.10 becomes the key upside hurdle as it comprises the channel resistance and June 16 high.