AUD/JPY recovers from 1-month low, runs into 50-DMA

AUD/JPY faded the drop to one-month low of 87.35 and is currently working hard to cut through the 50-day moving average (DMA) level of 87.61.

Focus on China services PMI

At 01:45GMT, China will publish September Caixin services and composite PMI.  In August, the services PMI had a score of 52.4, while the composite came in at 52.7. "Caixin survey differs due to a larger weight of small/medium businesses," explained analysts at Westpac. Thus, it gives a better picture of the economic activity. Moreover, the state owned enterprises (SOE's) (bigger weight in official PMI) have a relatively easy access to credit as compared to the small/medium businesses.

An uptick in the services PMI could strengthen the bid tone around the Aussie dollar.

Meanwhile, "Kim fatigue" is evident as markets are unwinding Yen long positions initiated on Friday after a report hit the wires that North Korea is preparing to test a long-range missile, which it believes can reach the west coast of the United States.

"Kim fatigue" is realization that North Korea is unlikely to start a war with the US and the uneasy status quo is likely to continue. Thus, the Norea-led strength in the Yen is short lived.

AUD/JPY Technical Levels

A violation at 87.61 (50-DMA) would open doors for 87.92 (Sep. 29 low) and 88.02 (5-DMA). On the downside, breach of support at 87.30 (61.8% Fib R of Aug 11 low - Sep 21 high) would expose support at 87.00 (psychological level) and 86.56 (Sep. 6 low).