During Wednesday’s Asian trading session, the AUD/JPY currency pair failed to halt its modest bearish moves and remained depressed near below the 77.00 level due to Australia’s downbeat housing data, which tends to undermine the Australian dollar and contribute to the currency pair declines. Apart from this, the reason for the currency pair’s losses could also be attributed to the prevalent Brexit risks and trade tussles between China and the West, which keep challenging the upbeat market mood and undermining the perceived riskier Australian dollar.
On the contrary, the market risk-on sentiment, backed by the optimism over a potential vaccine for the highly dangerous coronavirus infection, tends to undermine the safe-haven Japanese yen and becomes the key factor that helps the currency pair limit its deeper losses. Furthermore, the risk-on market sentiment could also be attributed to the reports suggesting that the U.S. presidential transition has finally started, which offers political certainty. Across the pond, the downbeat Japanese corporate service price index data added further burden around the Japanese yen and became the key factor that kept the lid on any additional losses in the currency pair. Currently, the USD/JPY currency pair is currently trading at 76.67 and consolidating in the range between 76.64 – 77.05.
Despite the lingering doubts about the U.S. economic recovery and the escalating tension between the world’s two biggest economies, the market players continue to cheering optimism over a potential vaccine for the highly dangerous coronavirus infection, boosts the hopes of global economic recovery and supporting the market trading sentiment. Thus, these further developments surrounding the covid vaccine favor the market’s risk-on mood. However, the perceived risk currency Australian dollar is relatively unaffected by the risk-on market sentiment and remains defensive amid downbeat housing data from Australia. At the data front, the Constriction Work Done for the 3rd-quarter (Q3) dropped below -2.0% forecast and -0.7% previous readouts to -2.3% QoQ.
Across the pond, the reason for the upbeat market mood could also be associated with the on-going optimism over the U.S. economy as President-elect Joe Biden has recently been allowed to receive the President’s Daily Brief, the collection of classified intelligence reports prepared for the national leader. This, in turn, undermined the safe-haven Japanese yen and became the key factor that helps the currency pair limit its deeper losses. Moreover, the currency pair’s losses were also capped by the downbeat Japanese corporate service price index data, which tends to undermine the Japanese yen and helps the currency pair to cap its downside momentum.
On the other hand, the intensifying coronavirus woes across the globe and intensifying lockdown restrictions in Europe and the U.S. keep challenging the upbeat market sentiment, which could also be considered one of the key factors the currency pair down. The reason could also be associated with the long-lasting delay in the much-awaited coronavirus (COVID-19) relief package, which also probes the bulls and contributes to currency pair declines.
Looking ahead, the market traders will keep their eyes on the U.S. economic calendar, which will show the releases of the U.S. Preliminary Q3 GDP, Initial Jobless Claims, Durable Goods, and Core PCE Index. This data will likely influence the USD price dynamics and help traders to take some fresh directions. All in all, the updates surrounding the Brexit, virus, and U.S. stimulus package will not lose their importance.
Daily Support and Resistance
Pivot Point 76.73
The AUD/JPY pair faced resistance at 77 levels, holding below an immediate support level of 76.58. A bearish breakout of the 76.58 level can extend selling bias until the 76.23 level. The MACD and RSI are holding below a double top level of 77, suggesting odds of a selling bias in the AUD/JPY. Continuing a selling trend can lead the AUD/JPY until 76.58 and 76.25 level today, thus we entered the sell trade signal. Stay tuned; good luck!