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  • AUD/JPY fails to overcome the US-China trade tussle, global recession fears.
  • Second-tier Aussie data, China’s Caixin Manufacturing PMI, trade headlines will direct near-term market sentiment.
  • The US traders are off for a Labor Day holiday.

Following its second consecutive month of declines, the AUD/JPY pair takes the rounds to 71.50 during initial Asian trading session on Monday.

The US and China continue to spread global trade pessimism and push major central banks towards further monetary easing amid downbeat data points at home. As a result, investors shift from riskier assets like equities and prefer safe-havens. In doing so, bond yields plummet to multi-year low with the latest two-year yields’ crossover of the 10-year counterpart from the US firming recessionary fears.

Recently released official purchasing managers’ index (PMI) data from China showed that the world’s largest industrial player keeps struggling due to its trade war with the global leader, i.e. the US. The August month Manufacturing PMI lagged behind 49.7 market consensus to 49.5, marking another figure in the contraction region, while Non-Manufacturing PMI grew past 53.6 forecasts to 53.8.

On the news front, China’s Financial Stability and Development Commission (FSDC), the State Council, recently promised more economic support to overcome the trade war’s negative impact when the US President Donald Trump has pushed the American tariffs to levels not seen since 1960. Adding downside pressure is the escalation of geopolitical tension emanating from Hong Kong.

Investors will now keep an eye over the upcoming second-tier data from Australia and China’s Caixin Manufacturing PMI for fresh impulse. AiG Performance of Manufacturing (Mfg) Index, TD Securities Inflation and ANZ Job Advertisement for the August month join second quarter (Q2) Company Gross Operating Profits from Australian economic calendar whereas China’s August month Caixin Manufacturing PMI will decorate Chinese data-line.

Technical Analysis

A sustained break below 71.00 becomes necessary for sellers to aim for August 07 low near 70.70 while 70.00 could check bears afterward. On the contrary, a falling trend-line since August 13, at 71.73, can keep the pair under pressure ahead of fueling it to a month-old descending resistance-line, at 72.35 now.