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  • AUD/JPY extends the late-Friday pullback from 73.79.
  • Fears of virus resurgence hit the risk catalyst.
  • Aussie PM Morrison said A$100bn of economic activity will be lost this year due to coronavirus COVID-19).
  • China’s May month data dump will offer immediate trade direction, virus headlines remain as the key.

AUD/JPY prints 0.87% losses as declining to 73.10 during the early Monday morning in Asia. In doing so, the pair defies Friday’s recovery moves while bearing the burden of pessimism surrounding COVID-19 outbreak 2.0. Also increasing the burden on the pair could be protests in the US and Fed policymakers’ worrisome comments.

Not only the surge in the pandemic numbers from the various US states but partial shutdown in China’s Southern Fengtai district, due to the spread in virus via a major wholesale food market, add to the market’s fear of the virus 2.0. Also supporting the downbeat expectations could be the headlines from Tokyo that suggest the highest increase in the numbers of cases since May 05.

It should also be noted that the Australian Prime Minister Scott Morrison recently crossed wires, via Reuters, and expected a loss of over Australian Dollar 100 billion due to the deadly virus.

Additionally, the American protests are also on, even with less strength, which widens the difference between the US President Donald Trump and State Governors like New York’s Andrew Cuomo. In his weekend interview with Fox Business, US President Trump highlighted the need to be tough while also saying, “We won’t let Seattle be occupied by anarchists.”

Furthermore, Bloomberg’s piece expecting another round of downbeat comments from the Federal Reserve Chairman Jerome Powell keeps the risk-tone heavy. On the contrary, the Dallas Fed President Robert Kaplan praised recovery in the employment market despite holding the yearly downbeat outlook on the unemployment rate.

Amid all these catalysts, S&P 500 Futures drop over 1.0% whereas Japan’s Nikkei declines 0.45% to 22,195 by the press time.

Looking forward, China’s May month Industrial Production and Retail Sales could offer immediate direction to the pair. However, the virus updates are likely to remain in the driver’s seat. Market consensus suggests further recovery in the key data from Beijing but the Aussie is less likely to cheer the outcome much unless the present risk aversion fades.

Technical analysis

Unless breaking a one-week-old falling trend line, currently near 74.05, sellers are likely targeting a 200-day SMA level around 72.30/25 during the further fall.


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