AUD/JPY extends pullback from 10-week top after RBA minutes

• AUD/JPY retreats from multi-day top following downbeat RBA minutes.
• Risk-tone sours amid Aussie-China tussle, increasing hopes of coronavirus cure.
• Downbeat comments from Japanese policymakers fail to get noticed.
• Japanese Industrial Production, trade/virus updates will be crucial to follow.

AUD/JPY drops to 70.15, still up 0.17% on a day, after RBA released minutes of its May month monetary policy on early Tuesday. That said, the pair earlier surged to the highest since March 05 but later on stepped back on the Aussie-China tension.

Read: RBA minutes: GDP in Australia’s major trading partners was expected to decline significantly over the first half of 2020

China’s confirmation of 80% tariffs on Australian barley intensifies the Aussie-Sino tussle that took clues from the previous week’s ban on Aussie meat from certain processors. In a reaction to the anti-trade measures, the Australian diplomat said to approach the World Trade Organization (WTO).

Although the dragon nation’s recent trade-negative measures are likely reaction to the Aussie PM Scott Morrison’s push for an investigation into the virus outbreak, Chinese officials deny the claims. It’s worth mentioning that Australia’s Agricultural Minister Simon Birmingham also turns down claiming China’s action as a trade war while citing them as concerning.

Before the latest Aussie-China tussle, markets were happy cheering the hopes of the coronavirus (COVID-19) cure. Also adding strength to the risk-on sentiment was increasing odds for the further stimulus from the Fed, BOE and Europe.

That said, the US 10-year Treasury yields drop three basis points to 0.713% whereas Japan’s NIKKEI trims early day gains to revisit 20,520 mark, still up 1.90% on a day, by the press time.

Traders may now keep eyes on any further developments surrounding the Aussie-China story while also checking for the virus updates for immediate direction. Further, Japan’s April month Industrial Production, expected to remain unchanged at -5.2% YoY, can also offer fresh impulse to the pair watchers.

Technical analysis

An upward sloping trend line from March 09 and 100-day SMA guard the pair’s immediate upside around 70.60, a break of which can escalate the rise to March high of 71.52. On the contrary, an eight-day-old ascending trend line near 68.78 becomes the short-term key support.