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  • AUD/JPY is feeling the pull of gravity amid renewed US-China trade war fears.
  • The cross is currently trading at the lowest level since Jan. 4.
  • Risk-off has put a bid under the JPY.

Trump’s renewed China trade threat and the resulting flight to safety has strengthened the bid tone around the anti-risk JPY.

The AUD/JPY pair is currently trading at 76.95, the lowest level since Jan. 4, having hit a high of 77.55 earlier today.

President Trump tweeted Sunday that tariffs on $200 billion worth of Chinese goods will increase to 25% on Friday from the current 10%, pouring cold water over the optimism generated by repeated claims by both Washington and Beijing that trade negotiations are going well.

Further, Trump threatened to impose 25% tariffs on an additional $325 billion of Chinese goods “shortly”. The President added that trade talks with China are continuing, but are moving too slowly.

The renewed fears of a full-blown trade war have sent risky assets lower in Asia. For instance, the futures on the Dow Jones Industrial Average are currently down 400 points, while those on the S&P 500 are down 50 points. Both oil benchmarks – WTI and Brent – are also reporting a 2% drop.

As a result, the classic safe havens like JPY and Gold are flashing green. The Japanese Yen has gained 0.4% against most majors and gold is mildly bid with 0.25% gains.

Looking forward, the AUD/JPY cross may suffer deeper losses if China’s Caixin Services PMI (Apr), due at 01:45 GMT, prints below estimates. Further, the news is crossing the wires that China’s Vice Premier Liu He has canceled a trip to Washington. That would only boost trade war fears and strengthen the bid tone around the safe havens.

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