AUD/JPY remains on the road to recovery despite renewed risk aversion

• AUD/JPY clings to gains even if risk tone turns heavier off-late.
• China continues to support Yuan depreciation after stepping back the previous day.
• Trade/political headlines also contribute to the risk-off mood.

AUD/JPY takes the rounds to 72.00 just after China’s released its official Yuan reference rate on early Wednesday.

The dragon nation surprised markets by letting the domestic currency (the Chinese Yuan CNY) weaken against the US Dollar (USD), to 6.9996 compared to yesterday’s fix at 6.9683.

Market sentiment improved on Tuesday after China back stepped from forcing the currency further below Monday’s record lows.

Earlier during the day, headlines from China renewed risk-off sentiment by criticizing the US behavior whereas geopolitical tension at Hong Kong and the Middle East offered additional pace to the risk-averse mood.

Elsewhere, the Bank of Japan’s (BOJ) Summary of Opinions highlighted offshore risk and the central bank’s readiness to counter the same with ultra-loose monetary policy.

While June month Aussie Home Loans, expected 0.6% versus 0.0% prior, becomes immediate catalyst to watch, mostly empty economic calendar can keep diverting traders to trade/political headlines while looking for fresh direction.

Technical Analysis

A downward sloping trend-line since month-start, at 72.08, acts as immediate resistance that holds the key to pair’s rise towards 100-hour moving average (HMA) level of 72.68 and then the following advances to 73.20 resistance. On the contrary, pair’s declines below latest low near 71.23 might not refrain from calling January lows near 70.71 ahead of flashing 70.00 on bears’ radar.