AUD/JPY: Mild risk-off, downbeat AU catalysts exert downside pressure

• AUD/JPY fails to hold on to recovery gains as risk-tone heavies, Aussie catalysts dim.
• US-China trade saga could worsen after the US passed a bill concerning Hong Kong.
• AU Westpac Index, comments from Australian Treasurer add weakness to the AUD.

With the likely challenges to the US-China relations, coupled with soft fundamentals, downbeat statements concerning Australia (AU), the AUD/JPY pair refrains from extending the previous day’s recovery while declining to 73.43 during the Asian session on Wednesday.

Although recent signals from China have been favorable to the trade deal with the United States (US), news that the US House passed a bill that requires annual review of the situation in Hong Kong to ascertain Beijing has no influence sours the mood off-late.

On the other hand, Australia’s Westpac Leading Index for September came in above -0.28% prior to -0.08%. However, Westpac still considers it below trend while saying, “The growth rate is now materially below trend and is signaling that growth through the first half of 2020 is likely to remain below trend. That profile is broadly consistent with Westpac’s forecasts which have grown in the first half of 2020 at an annualized pace of 2.4% consistent with the overall growth pace in 2020 of 2.4%.”

Additionally, downbeat growth forecast by the International Monetary Fund (IMF), Fitch citing Chinese risk as major for Australia’s credit investors and comments favoring an increase in the budget spending by Australian government from the AU Treasurer Frydenberg are some other catalysts that have recently dragged the Australian Dollar (AUD) down against major counterparts.

With this, the global risk sentiment rolls back some of its earlier gains with the US 10-year treasury yield taking rounds to 1.76%, down one basis point.

While no major data is scheduled for publishing during the Asian session, headlines concerning the major drivers, namely trade and Brexit, could keep entertaining traders.

Technical Analysis

The pair needs to close beyond 100-day Simple Moving Average (SMA) level of 73.80 in order to lure buyers and aim for September month high of 74.50, failure to do so can gradually fetch the quote towards the early-month bottom near 71.70.