• Short-term bearish pattern favor sellers targeting current month low.
  • Oversold RSI may challenge increased selling pressure.

With the three-week-old descending trend-channel continues to direct AUD/JPY moves downwards, the pair presently traders near 75.18 during the initial Asian session on Thursday.

The current month low around 74.96 seems an immediate target for sellers following the bearish pattern. Though, oversold levels of relative strength index (RSI) might question bears during further moves, if not then channel’s lower line surrounding 74.70 could be on their radar.

If at all prices keep declining under 74.70, July 2016 low at 74.50 can offer an intermediate halt prior to plummeting to the year 2016 bottom around 72.40/45.

On the upside, 21-day simple moving average (SMA) level of 75.63 acts as nearby resistance ahead of channel’s upper-line, at 75.83.

Should buyers defy the bearish pattern by fueling the quote beyond 75.83, May 20 high near 76.40 and 77.00 could become their favorites.

AUD/JPY technical analysis

Trend: Bearish

Chinese media continues to criticize the US and Global Times offered one more such piece during early Thursday.

The editorial says that the US has gotten "political fever." Every policy centers around "America First" and serves US political purposes. The conduct of the US has laid bare that the US itself is a non-market economy. Its actions have nothing to do with the laws and principles of the market.

The report further mentions that China needs to be wary of some Western countries creating division within the WTO, marking countries as "market" or "non-market." The US is not a true market economy. This is a hard fact that more countries and enterprises should realize.

  • Risk-off remains highlighted.
  • Australian jobs data to offer fresh impulse.

Aussie traders gave little importance to welcome CPI figures from its largest customer China amid global risk-off and a disappointment from confidence data at home. Further, nervousness remains present ahead of the key jobs data as the AUD/USD pair seesaws near 0.6930 during the early Asian session on Thursday.

Global risk tone remained heavy as investors worried about the Federal Reserve’s meeting next week while most of the central bankers, including the ECB, have been mostly dovish off-late.

Adding to the pessimism could be the US President Donald Trump’s tweets that have been challenging to announce fresh tariffs on China if no progress on trade deal happens at the G20.

The Australian Dollar (AUD) has been mostly considered as a risk barometer and declines in times of market uncertainty. Another such risk gauge is the US 10-year treasury yield that slipped 2 basis points to 2.122% recently.

The US Dollar (USD) on the other hand ignored lesser than expected consumer price index (CPI) as investors rushed to the greenback in search of safety while dovish comments from the European Central Bank (ECB) board member provided additional strength to the momentum.

Looking forward, Australia’s May month employment data could portray election month push to the unemployment rate mark which is likely to slip to 5.1% from 5.2%. However, employment change is likely to soften to 17.5K from 28.4K.

Technical Analysis

Late May month lows around 0.6900 and 0.6860 are flashing on the sellers’ radar unless the pair manages to cross 0.6960. However, 50-day simple moving average (SMA) near 0.7010 could question the pullback then after.

The CNBC recently released a news report stating the Chinese giant Huawei’s another attempt to question its ban in the US over national security grounds during early Thursday.

The news report says that the company released an ex parte memo today outlining its position against the Federal Communications Commissions national-security-related ban of its equipment.

It was further reported that the company cites comments by government officials that it says appear to indicate the US may have economic motives for the ban, and cites the use of its equipment in other European and North American markets.

Huawei also said it has approached the FCC, but has not had a conversation with the commission about its proposal, which would involve using existing risk mitigation testing to put the equipment through an approval process, the news report mentions additionally.

S&P500 daily chart
The S&P500 Index consolidated the recent gains below 2,900.00. The market trades above its main daily simple moving averages (DSMAs).

S&P500 4-hour chart

The index is trading above its main SMAs suggesting bullish momentum in the medium term. The level to beat for bulls is at 2,910.00. A break beyond the resistance can lead to 2,940.00 and 2,960.00. Immediate support is at 2,880.00 and 2,840.00.

Additional key levels

The US Treasury Secretary Steve Mnuchin was on wires, via Reuters, during early Thursday in Asia.

Treasury Secretary Mnuchin commented over the likely aspect of the US budget deal at the Congress which Democrats can support.

He said that he would like the debt ceiling to be a part of the budget deal.

September 30 is the end of the US fiscal year by which annual budget should be ready and hence discussions concerning the same have started gaining market attention.

  • Trade tension, US Dollar (USD) strength kept derailing commodity-linked currencies.
  • Lack of domestic data increases the importance of the AU employment report.

Looming doubts over the global trade mechanism superseded contrasting inflation data from China and the US, which in turn negatively affected the Antipodeans off-late. NZD/USD marked the third day of losses by Wednesday’s end while remaining in the red area around 0.6575 at the start of Thursday’s Asian session.

May month inflation data from China and the US flashed mixed signals. The dragon nation’s CPI managed to meet the upbeat expectations mainly based on rising pork prices but price gauge missed the marks inside the world’s largest economy due to drag in used car prices.

Trade tensions remain present with confusing tweets from the US President Donald Trump as he expects a trade deal with China but also stands ready to levy fresh tariffs on $325 billion worth of Chinese goods if it doesn’t.

With no domestic data on hand, the Kiwi traders may now focus on employment numbers from its largest customer Australia. May month seasonally adjusted employment change may soften to 17.5K from 28.4K but unemployment rate can benefit from last month’s election and can slip to 5.1% from 5.2%.

Elsewhere, the US weekly jobless claims for the period ended on June 07 remains modestly flat to 217K versus 218K earlier.

Technical Analysis

Unless closing beneath late-May high around 0.6560, NZD/USD is less likely to decline further towards 0.6500 and 0.6480. With this, 0.6600 and 50-day simple moving average (SMA) level around 0.6620 gain buyers’ attention during the pullback ahead of targeting the latest high near 0.6680.

  • The DJIA ended down 43.68 points, or 0.2%, at 26,004.83.
  • The Nasdaq Composite Index also fell, by 29.85 points.
  • S&P 500 index lost 5.88 points, or 0.2%, to close at 2,879.84.

US benchmarks underperformed and the Dow Jones Industrial Average ended in the red for the second day in a row, struck by a softer than expected US CPI reading as well. Performances were undermined trade war angst creeping back into the mix now that the key US data event has past and following continuous antagonistic Tweets and comments through various media channels hitting the markets.

As a result, the DJIA ended down 43.68 points, or 0.2%, at 26,004.83, marking its first back-to-back loss this month, while the S&P 500 index lost 5.88 points, or 0.2%, to close at 2,879.84. The Nasdaq Composite Index also fell, by 29.85 points, or 0.4%, to 7,792.72. In summary to where the indexes are at this week, the Dow is on pace for a slight weekly gain of 0.1%, the S&P 500 is on track for a 0.2% rise, and the Nasdaq is looking at a 0.7% weekly climb.

  • Trade and global economic risks doing the rounds on Twitter

U.S. data

"US May CPI data was a touch softer than expected with the headline rate easing to 1.8% y/y (last: 2.0%, mkt: 1.9%) and core ticking down to 2.0% y/y (last: 2.1%, mkt: 2.1%). It was the usual mix of weakness in goods prices offsetting firmer services prices. Used car prices continued to drag as strength from late last year unwinds. The undershoot in inflation and the drag it transmits to inflation expectations is at the heart of the review and debate of optimising the monetary policy framework," analysts at ANZ Bank explained.

DJIA levels

For the DJIA, the technical outlook is sideways with the index remaining above the key 61.8% Fibo retracement level of April to June swing highs and lows, sulking below 78.6% mark in the 26200s with a confluence of the 12th April gap the prior day. On the flipside, the 20-D EMA is located just below the 50% Fibo of the recent daily range guarding a run towards the 200 D EMA and then the 25200 level, as being around the 11th March swing lows. On a break of 25000, bears can look towards 24500s and then 50% of the upside run made at the end of Dec at 24150.

  • The unemployment rate in Australia is forecast to slow down to 5.1% in May.
  • The US Dollar is on the rise across the board, sending AUD/USD down.

AUD/USD daily chart

AUD/USD is trading in a bear trend below its main daily simple moving averages (DSMAs). The market is trading at its lowest in 7 days.

AUD/USD 4-hour chart

AUD/USD is about to end the day on its low and below its main SMAs.

AUD/USD 30-minute chart

AUD/USD is under bearish pressure below its main SMAs. A sustained break below 0.6930 can send the Aussie to 0.6900 and 0.6880/70. Resistances are seen at 0.6960 and 0.7000 levels.

Additional key levels

Analysts at BNZ, trimmed their NZD optimism for the second half, given the escalation of US-China trade wars. They now see NZD/USD as largely confined within 0.65-0.69, but with downside risk still lingering over the short-term.

Key Quotes:

“Our NZD projections have been unusually stable, being unchanged over the past six months, even as we have recently highlighted some prevailing downside risk. We trim 1½-2 cents off our 2H19 projections, taking the average down to 0.6750, consistent with a view that the NZD largely trades within a 0.65-0.69 range.”

“Our projections for an NZD recovery over the second half, originally formulated late last year, were predicated on a generalised downturn in the USD alongside an easing in US-China trade tensions. We now abandon our assumption that US-China trade wars will be settled anytime soon.”

“The greater risk is that Trump imposes tariffs on the remaining $325bn of Chinese imports than removing recently imposed tariffs, to which China would respond with further retaliation. Since the trade war ramped up in Q2 last year, NZD performance has been closely linked to CNY. If the PBOC allowed USD/CNY to break above 7 – not currently part of our central view – then the NZD could easily sustain a clear break of USD0.65, putting last year’s low of 0.6425 under threat.”