JPY May Fall If PMI Data In Key Supply Chain Economies Brightens Outlook

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Japanese Yen, Supply Chain Economies, ASEAN, AUD/JPY – TALKING POINTS

  • Japanese Yen may retreat if key PMI data points to economic stabilization
  • Statistics will be printed from critical supply chain economies across Asia
  • Having said that, AUD/JPY price action is indicating a lack of confidence

On Friday, Wall Street stocks ended on an upbeat note. The Dow Jones, S&P 500 and Nasdaq indices closed 0.44, 0.77, and 1.49 Percent higher, respectively. In the S&P 500 benchmark, the technology sub-component led the way, with index heavy-weight Apple Inc (APPL) up over 10 percent by Friday’s close. This may help explain why the tech-leaning Nasdaq index was the session’s champion.

Its rise came as part of a broad rally in the technology sector and after an impressive earnings week for four out of the five members of the so-called FAANG group (Facebook, Apple, Amazon, Netflix and Google). Alphabet – Google’s parent company – was the loner who posted its first quarterly year-over-year revenue decline.Learn more about why technology stocks have rallied amid the coronavirus pandemic.

However, foreign exchange markets reflected a risk-off tilt. The haven-linked US Dollar trimmed some of its losses after reports that US lawmakers were no closer to ratifying another stimulus bill caused a flight to safety. The Euro was starved for love after Q2 GDP data printed record-breaking lows. AUD and NZD suffered with the commodity-linked Swedish Krona.

Monday’s Asia-Pacific Trading Session

In addition to thorny US-China relations, Asia-Pacific traders will be closely watching a cascade of PMI data from key regional supply chain economies. See the list here. If the statistics show on balance a polished outlook for growth despite a growing number of Covid-19 cases, the Japanese Yen’s anti-risk appeal may wilt while the allure of growth-oriented assets like the Australian and New Zealand Dollars may bloom.

AUD/JPY Analysis

AUD/JPY is struggling to break above an over one-year resistance range between 75.925 and 76.320 after facing two rejections in early-June and mid-July. Discouraged traders may therefore find it difficult to muster the strength to surpass even the lower tier now, especially since the most recent capitulation is still fresh. Friction at the lower bound may cause a pullback if moves to the upside – at least, for now – appear unlikely.

AUD/JPY – Daily Chart

Chart showing AUD/JPY

AUD/JPY chart created using TradingView

--- Written by Dimitri Zabelin, Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitriTwitter