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  • AUD/JPY is in a continuation of the downside, pressure below 75 handle.
  • The bears look to a  long term 78.6% Fibo target that marries up with the Jan 2003 swing lows.

The AUD/JPY pair opened with a bearish gap, to be expected considering the geopolitical climate over the trade war escalations. AUD/JPY is currently trading at 0.7073 and has fallen right on the 6th August lows and just a touch off the 2019 lows, (which even broker you use will have their own low for the year as it was a flash crash that printed the low). AUD/JPY is -0.59% on the session so far.

On Friday, the US stock markets finished deeply in the red which has weighed on the cross as the FX market’s risk barometer. AUD/JPY is also weighed on directly related to commodity priced and Chinese economic growth. The fact that the Reserve Bank of Australia will now be expected to cut interest rates sooner than later is an additional weight on the bar also.

Trade war escalations

Trump urged US companies to pull out of China and produce in the US following the Chinese announcement of retaliatory tariffs on USD75bn of US imports on Friday, effective 1 September and 15 December. Then, President Trump stated that the 10% levy on USD300bn of Chinese goods would be raised to 15% and the existing 25% levy on USD250bn of Chinese goods would lift to 30%.  

“The latest escalation suggests that uncertainty will continue to weigh on global trade, industrial production, and investment in the months ahead, with no sign of a resolution anytime soon. That said, the US and Japan agreed in principle to a trade deal at the G7 over the weekend, offering a glimmer of hope for world trade,”

analysts at ANZ Bank explained this morning.  

AUD/JPY levels

There is a bearish bias while below the 75 handle and the 72.20 resistance. Depending on your broker’s 2019 low, the pair can continue south. Pulling up the long-term charts, dating back to the global financial crisis, we can see that the cross is on its way towards the 78.6% Fibo target that marries up with the Jan 2003 swing lows – This is located at 66.40.