AUD/JPY: Recovery stalls ahead of 87 handle, risk reset waning?

The cross in AUD/JPY trimmed gains and fell back below 87 handle, having failed to sustain the recovery from five-week lows of 86.30 levels.

AUD/JPY heading back towards 50-DMA support

The cross is seen defending minor-bids as we head into mid-Asia, as renewed weakness in oil prices appear to spook markets again, while the latest headlines from North Korea, citing that it’s seriously examining "simultaneous fire" of 4 missiles at Guam, also continue weigh on the investors’ sentiment.

 AUD/JPY extended its overnight recovery mode regained 87 handle briefly, after the Aussie was boosted broadly on the back of cross-driven strength. Solid gains seen in the AUD/NZD cross helps keep the sentiment buoyed around the AUD, especially after the Kiwi slumped on RBNZ Governor Wheeler’s talking down the exchange rate.

Moreover, mixed Japanese core machinery orders and PPI data have kept the Yen on the back foot, further collaborating to the upside seen in AUD/JPY.

Focus will continue to remain on the persisting risk trends, which is expected to be a key driver for the cross in the day ahead, while we await the US economic releases, including the PPI figures.

Technical Levels

Higher side: 87.32 (5-DMA), 87.62 (10-DMA), 88.00/06 (round number/ 20-DMA)

Lower side: 86.74 (50-DMA), 86.50 (key support), 85.25 (200-DMA)