AUD/JPY runs into a test of the 100-day moving average
All of a sudden, the market has decided to focus back on the trade rhetoric and emerging market worries - and that has led to equities sentiment turning a little sour overnight and in Asian trading today.
In turn, that is helping to keep the yen underpinned with US Treasury 10-year yields falling to 2.93% from 2.98% overnight as bonds rally.
Meanwhile, the aussie looks to be continuing its struggle after the release of Chinese data earlier which isn't that bad in my view. Imports surged and that should be a positive, and a narrowing trade balance while looks bad on paper - it opens up potential RRR cuts and that should help Chinese equities in general. But yes, that's the long game.
Either way, as mentioned yesterday here, if sellers do find a break below the 100-day MA (red line) it will re-establish the bearish bias back in the pair and that will lead to a further downside move.
Now that the market has turned back to focus on the trade rhetoric, that could be enough to push the pair lower in the near-term. The risk here is that the G7 summit today and tomorrow turns out to be a happy and peaceful one where a lot of reconciliation on trade is done - but I wouldn't count on it.
The rhetoric during the summit may impact prices when we open on Monday, so be wary of that as well.
