AUD/JPY ignores better-than-expected Australia Q2 GDP to retreat towards 94.00 amid sour sentiment
- AUD/JPY stays depressed amid risk-off mood, ignores upbeat Australia growth figures.
- Australia’s Q2 GDP rose past market forecasts to 0.4% QoQ and 2.1% YoY respectively.
- JPY eases amid fears surrounding Japan intervention, China slowdown and mixed concerns about Australia.
- RBA Governor Lowe’s Speech, fears of Japan meddling and China news should be watched closely for fresh impulse.
AUD/JPY remains pressured for the second consecutive day as sellers attack the 94.00 round figure even after witnessing upbeat Australia growth numbers on early Wednesday. In doing so, the cross-currency pair justifies its risk-barometer status amid fears emanating from China.
Australia’s second quarter (Q2) Gross Domestic Product (GDP) rose to 0.4% QoQ versus 0.3% marked expectation and 0.20% prior readings but the yearly figures eased to 2.1% YoY from 2.3% previous readouts, versus the analysts’ estimations of 1.7%.
It’s worth noting that the US 10-year Treasury bond yields remain firmer around 4.27% after rising eight basis points (bps) to 4.26% the previous day, which in turn should have fuelled the AUD/JPY pair. However, fears about China and the Reserve Bank of Australia’s (RBA) dovish halt exert downside pressure on the pair.
That said, fears of China’s economic slowdown and the soft landing in the US roiled the sentiment and fuelled the Greenback. China's Caixin Services Purchasing Managers' Index (PMI) for August dropped to the lowest level of the year with 51.8 figures versus 54.1 prior. While giving the details, Dr. Wang Zhe, Senior Economist at Caixin Insight Group said that the gauges for business activity and total new business remained above 50 for the eighth consecutive month, but both readings were lower than in July.
The market’s lack of confidence in the Chinese measures to defend the economy, as well as the recent Sino-American tensions over Taiwan and the US businesses’ discomfort in Beijing, also challenged the market sentiment and weighed on the cross-currency pair. In doing so, the quote ignores China’s recently announced slew of quantitative and qualitative measures to defend the economy from losing the post-COVID-19 recovery. On the same line was the news suggesting the ability to avoid default by China’s biggest reality player Country Garden.
Additionally, fears of Japan intervention to defend the Yen, after the Japanese currency refreshed the yearly low versus the US Dollar, seem to have also weighed on the AUD/JPY price.
While portraying the mood, S&P500 Futures print mild losses by tracking Wall Street’s downbeat close.
Moving on, RBA Governor Lowe’s last speech before resigning will be crucial to watch for clear directions as any signals of policy pivot could drive Aussie further towards the south.
Technical analysis
A five-week-old rising wedge formation, currently between 93.70 and 95.10, keeps AUD/JPY bears hopeful.