AUD/JPY testing key support near 78.50, focus on US-China trade talks

• Fresh JPY buying amid a drop in S&P 500 futures, drags AUD/JPY lower.
• Focus on risk trends ahead of the key event risks this week.

The AUD/JPY pair came under fresh selling pressure at the start of a new week, as the demand for the safe-haven Yen returned to markets alongside mild risk-aversion seen on the US equity futures.

The US S&P 500 futures kicked-off the week on a negative note, prompting fresh selling in the USD/JPY pair that eventually dragged the greenback broadly lower, refreshing fresh weekly lows at 95.73.

Meanwhile, the cross faded its recovery attempts near 78.70 levels and reversed to test the key support near the midpoint of the 78 handle, as the Yen remained unfazed by the Bank of Japan (BoJ) December meeting minutes. BoJ Minutes: It is appropriate to continue easing persistently

Further, the spot also remains weighed down by the increased odds of an RBA rate cut in the coming months after the NAB‘s mortgage rate hike underscored concerns over the Australian housing market slowdown.

Looking ahead, the US-China trade talks are likely to remain the main event risk for the risk barometer, AUD/JPY, while the Australian CPI report and the FOMC decision will also have a major bearing on the cross.

AUD/JPY Technical Levels