• AUD/JPY sinks heavily in early Asia following updates with regards to the US/Sino trade talks.
  • The bears can aim for a continuation of the September downtrend and target 71 the figure.

AUD/JPY, which trades as a proxy to trade war headlines and risk-off themes in general, fell heavily in early Asia following the rather unsurprising updates with regards to the US/Sino trade talks getting underway this week in the US. The cross has fallen over 0.50% to a fresh low since the 3rd October business.
AUD/JPY is currently trading at 71.91 having been as low as 71.84 so far – The Chinese Yuan is down around 0.40% vs the USD.

The South China Morning Post says US and China make no progress on key trade issues

The moves in the currencies which are the most directly affected by the relationship between the US and China were hit hard when news that The South China Morning Post sources had said the following:

  • US and China make no progress on key trade issues in two days of deputy-level talks, sources say.
  • The Chinese delegation refuses to talk about forced technology transfers, a core US grievance in the negotiations, a person with knowledge of the meetings says.
  • High-level talks are expected to last for only one day, with Liu He and his team now planning to leave Washington on Thursday.

This comes in stark contrast to some of the overnight reports that had stated the Chinese had remained open to a partial deal despite the US blacklist on Chinese tech firms. It also makes Trump's post-Wall Street close remark pretty foolish when he said there was a “really good chance” of a deal.

AUD/JPY levels

While below the descending 21-wek moving average and the 74 handle, the bears can aim for a continuation of the September downtrend and target 71 the figure and Sep lows while in pursuit of the July lows down at 69.95.

  • AUD/USD, which trades as a proxy to trade war headlines, has dumped on the latest trade headlines.
  • The South China Morning Post sources have come with a piece that has sent the Aussie lower across the board.

AUD/USD, which trades as a proxy to trade war headlines, has dumped on the latest trade headlines which confirm that the trade talks this week were doomed to fail from the get-go. Overnight, AUD/USD round-tripped from 0.6725 to 0.6745/50 and back and in early Asia, AUD/USD has made a fresh low of 0.6715 since October 3rd, trading weakness in the Yuan which is down 0.40% vs the USD.

There has been an evolving story leading into the trade talks this week with growing scepticism, especially in overnight trade following a series of conflicting headlines. The latest, of which, has come in early Asia and set the scene for a risk-off end to the week and foreseeable future in global financial and commodity markets.

The South China Morning Post sources have come with a piece that has sent the Aussie lower across the board, reporting: US and China make no progress on key trade issues in two days of deputy-level talks, sources say. The Chinese delegation refuses to talk about forced technology transfers, a core US grievance in the negotiations, a person with knowledge of the meetings says. High-level talks are expected to last for only one day, with Liu He and his team now planning to leave Washington on Thursday.

This has completely stripped any inclining of optimism which had started to filter its way through to markets at the start of overnight trade when Chinese negotiators arrived in the US and initially saying that they remained open to a partial deal despite the US blacklist on Chinese tech firms. At the Wall Street close, US President Trump said there was a “really good chance” of a deal – Always the optimist in the face of adversity.

Meanwhile, as for domestic data, the Australian consumer sentiment slumped -5.5% to a 4 year low in October, despite the RBA rate cut. "AUD/USD flickered slightly lower but then repeated Tuesday’s price action, edging back above 0.6740 as the Chinese yuan firmed. The ASX 200’s -0.7% close wasn’t as dramatic as the steep decline on Wall Street but was still weaker than most of the region," analysts at Westpac explained.

FOMC minutes show Fed worried market pricing too much easing

As for the US Dollar, there was little reaction to the September FOMC minutes which reflected a generally positive outlook from policymakers. Analysts at Westpac, however, noted that "many" thought that low inflation plus the risks from trade wars and the global slowdown justified September’s rate cut. "A "few" worried that the market was pricing too much easing, and "several" wanted the statement to have more clarity on when the easing would likely end."

Looking ahead, the US data focus is September's Consumer Price Index.

AUD/USD levels