AUD/JPY feels the pull of gravity as US raised stakes in a trade war with China

• Risky assets are under pressure in Asia and anti-risk JPY is better bid courtesy of worsening US-China trade tensions.
• AUD/JPY is reporting losses, signaling risk aversion and risks bearish doji reversal.

The AUD/JPY pair – a barometer of risk appetite in the markets, is flashing red on worsening trade tensions between the US and China.

Reports hit the wires earlier today that Trump administration is planning to impose tariffs on an extra $200 billion worth of Chinese imports, after having imposed a 25 percent tariff on $34 billion of Chinese imports last week.

Beijing, which responded with matching tariffs last week, is expected to do so again should the Trump administration announce additional tariffs. Clearly, the world’s two biggest economies are closing on a long drawn out trade war and hence riskier assets are feeling the pull of the gravity.

Shanghai Composite dropped 1.7 percent in early trade. As of writing, the Nikkei is down 2 percent and the S&P 500 futures are reporting a 0.80 percent drop.

Consequently, the anti-risk Japanese Yen is on the rise. The AUD/JPY dropped 80 pips to a session low of 82.00 and is now trading at 82.28 – down 0.63 percent on the day.

Australia consumer sentiment, published by the Melbourne Institute and Westpac Bank survey of 1,200 people, rose to 3.9 percent in July – the highest since late 2013. The strong data released earlier today failed to put a strong bid under the Aussie dollar.

AUD/JPY Technical Levels

A daily close today below 82.65 (yesterday’s doji candle low)  would confirm a bearish doji reversal, signaling the rally from the recent low of 80.63 has ended.

Resistance: 82.51 (100-day moving average), 82.80 (session low), 83.16 (previous day’s high)

Support: 82.00 (psychological support), 80.98 (July 2 low), 80.63 (June 19 low).