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  • AUD/JPY extends the previous run-up to three-week high after trade numbers from Australia.
  • Risk tone ignores US anti-dumping duties on China/Mexico while giving importance to news from China and Hong Kong.
  • Trade/political headlines could keep directing near-term market sentiment.

Despite weaker than expected and prior Australian trade balance numbers, AUD/JPY escalates its previous run-up to fresh three-week high while taking the bids to 72.70 during early Thursday.

Investors mostly ignored the US levying anti-dumping duties on China and Mexico’s structural steel while also showing less attention to the US-Iran tussle, as positive news from Hong Kong and Britain dominated sentiment. Hong Kong leader Carrie Lam promised to withdraw the much-debated bill which would have allowed extradition to mainland China. Elsewhere, the United Kingdom (UK) lawmakers step further towards blocking a no-deal Brexit while voting down the Prime Minister (PM) Boris Johnson’s bid for early election.

It should also be noted that upbeat comments from the Fed’s Beige Book, Bank of Canada (BOC) and a lack of dovish statements from the Fed speakers offered additional assurance to risk-takers. Furthermore, the latest news from China’s Commerce Ministry that the US-China trade talks will take place in October in Washington adds strength to the market bulls.

As a reaction, the US 10-year treasury yields are gaining nearly six basis points (bps) to 1.516% by the press time.

Having witnessed initial reaction to Australia’s trade balance, investors are left with no major data from either Australia or Japan, which in turn increases the importance of trade/political news headlines to determine near-term pair moves.

Technical Analysis

The pair’s needs a sustained break above 72.37/38 area including falling trend-line since August 02 and 38.2%  Fibonacci retracement of July-August downpour in order to aim for 73.18/22 area including August 02 high and 50-day exponential moving average (EMA). If prices fail to hold recent upside momentum, 21-day EMA level of 72.12 and August 29 top surrounding 71.80 could flash on the sellers’ radar.