AUD/JPY drops to 3-day low after weaker-than-forecast Australia private capital expenditure

• AUD/JPY plummets to fresh low since Monday amid an increase in risk-off, weaker Australia data.
• Australia’s Private Capital Expenditure slipped beneath expectations.
• Political plays concerning US-China, Hong Kong join challenges to the US Fed and likely PBOC rate cut to favor risk-aversion wave.

With Australian data adding pessimism to already risk-averse markets, AUD/JPY slumps to three-day low while trading near 71.25 during Thursday’s Asian session.

Australia’s Private Capital Expenditure for the second quarter (Q2) of 2019 slipped below +0.5% forecast to -0.5% versus -1.7% prior. The numbers indicate Australia’s weak indicate weak economic expansion and have dragged the Australian Dollar (AUD) after the release.

Adding to the momentum is the White House Adviser Peter Navarro’s push for the rate cuts to the US Federal Reserve and mixed comments concerning the US-China trade negotiations by the US Treasury Secretary and the White House Director of Legislative Affairs, Marc Short. Furthermore, the Global Times’ story showing increasing geopolitical tension between the US and China concerning the South China Sea and Reuters’ expectations of a rate cut from the People’s Bank of China (PBOC) spread trading fears.

As a result, the US 10-year treasury yield declines nearly two basis points to 1.451% and the two-year yield also being on the losing side to 1.492%, which in turn signals a widening gap of the yields and an upcoming recession in the US.

Given the latest headlines-driven risk-aversion wave, coupled with a lack of data, investors will keep an eye over trade/political news while looking for fresh direction of AUD/JPY.

Technical Analysis

The week-start gap near 70.75 seems immediate support to watch ahead of looking at 70.00 during the AUD/JPY pair’s further declines while a week-long falling trend-line near 71.70 can keep exerting downside pressure on the quote.