- AUD/JPY defies pullback from 78.36 after China’s Caixin PMI flashed welcome figures.
- China’s Caixin Manufacturing PMI crosses 52.6 forecast and 52.8 prior to 53.1 in August.
- Doubts over US stimulus, Sino-US tension joins mixed data to weigh on the market’s mood.
- RBA, chatters surrounding Japanese leadership will be the key.
AUD/JPY picks up the bids near 78.20 during the early Tuesday. The pair aussie cross recently gained after China marked surprise improvement in the private manufacturing activity numbers. In doing so, the quote seesaws around the previous day’s high, also the highest since May 2019.
Read: Chinese Caixin Manufacturing PMI, Aug beatsat 53.1 (VS 52.8 IN July)
Earlier during the day, Australia’s Current Account Balance for the second quarter (Q2) joined August month’s Building Permits to challenge the downbeat Aussie PMIs flashed by the AiG and Commonwealth Bank (CBA). While the AiG’s gauge of manufacturing activity slumped below 50, it’s counterpart from the CBA defied 53.9 forecast and prior for August. Further, Aussie Current Account surged past-13B expected to 17.7B.
On the other hand, Japan’s Unemployment rate slipped below 3.0% to 2.9% but Job/Applicants Ratio matched 1.08 forecast for July. Additionally, the Ministry of Finance official from has told Reuters that Japan firms’ sales post the largest YoY decline in April-June since the first quarter of 2009.
Other than the mixed data, market sentiment stayed sluggish amid a lack of major data/events and a light news feed. The chatters surrounding Japan’s next leadership continues with the Chief Cabinet Secretary Suga submitting his candidature. Elsewhere, the US Treasury Secretary Steve Mnuchin blamed House Speak Nancy Pelosi and the Democratic Leader of the Senate Chuck Schumer for the deadlock. Furthermore, the coronavirus (COVID-19) cases in Australia and Tokyo have been receding off-late while hopes of the vaccine are also on the spike.
Having witnessed the initial reaction to data from the key customer, AUD/JPY traders will wait for the RBA before taking any entries. Although the central bank isn’t expected to announce any rate change and keep its dovish bias, odds of any surprises can’t be ruled out.
Read: Reserve Bank of Australia Preview: A dovish stance won’t be a shock
Technical analysis
While an upward sloping trend line from August 25 favors the bulls, the latest weakness in the RSI and MACD signals suggest buyers wait for clarity. Hence, retracement from a multi-week high can revisit the short-term support line, at 77.61 now, but the pair’s further declines will be restricted by the 200-HMA level of 76.60. On the contrary, the 78.25 mark holds the key to the pair’s further upside beyond the latest top near 78.50.
Read: AUD/JPY Price Analysis: Consolidates above 78.00, weekly support line in focus
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