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  • AUD/JPY pulls back from eight week low but stays heavy for the eighth day in a row.
  • Australian Retail Sales shrank 4.2% in August versus 3.2% previous advance.
  • Market sentiment ignores hope of the US stimulus amid virus woes.
  • Japan’s All Industry Activity Index, comments from BOJ’s Kuroda will offer immediate direction.

AUD/JPY extends bounces off the multi-day low of 74.94 to 75.05 during the early Wednesday. Downbeat prints of Aussie Retail Sales seem to battle the risk-off mood amid mixed catalysts while helping the pair’s recovery. Though, bulls are less likely to be lured amid broad worries concerning the coronavirus (COVID-19) and recently dovish comments from the major central bankers, not to forget the US-China tussle.

Australia’s preliminary Retail Sales reverse the prior advance of 3.2% while marking a monthly drop of 4.2% in sales during August. Earlier during the day, the Commonwealth Bank of Australia (CBA) flashed welcome prints of the preliminary Manufacturing PMI for September. The activity gauge grew past-48.3 forecast and 53.6 prior to 55.5 in the reported month.

However, the recent cluster of COVID-19 found in Brooklyn keeps highlighting the virus woes and probes the risk-on sentiment. Traders fear that the earlier declining pandemic numbers from the US have been challenged and the same could further weigh on the hopes of the global recovery.

This contrasts with the expectations of the American stimulus after the Congress agreed over the stop-gap funding to avoid a government shutdown in October. The US policymakers have been at loggerheads on this issue, in addition to wrangling over the major stimulus bill. Hence, the solution to the immediate problem increases the odds of breaking the aid package deadlock as well.

Against this backdrop, the Japanese yen mark heavy gains as traders in Tokyo return for the first time since last Friday. Further, the S&P 500 Futures stay mildly heavy whereas the US 10-year Treasury yields and stocks in Asia-Pacific stay mostly positive.

While Japan’s All Industry Activity Index for July, expected 3.3% versus 6.1% prior, can offer immediate direction to AUD/JPY, traders will be more interested in hearing BOJ Governor Haruhiko Kuroda, up for speaking at 05:35 GMT, for fresh impetus.

It should, however, be noted that the major attention will be given to how the global PMIs portray the virus resurgence, together with other risk catalysts.

Technical analysis

AUD/JPY declining for the last seven consecutive days and is pushing MACD histogram towards flashing the most bearish signals since late-June.  However, nearness to the 75.00 threshold and 100-day EMA level of 74.87 questions the pair’s further downside. As a result, bulls await the pair’s bounce that can aim for August month’s low around 75.60 ahead of challenging 50-day EMA near 76.00.