AUD/JPY defends 80.00 on mildly bid stock futures ahead of China PMI

• AUD/JPY licks its wounds around weekly low, pauses after two-day fall.
• Market sentiment improves as vaccine optimism battles US Senate updates.
• Fed taper woes, pessimism concerning China, Evergrande challenge the bulls.
• China PMIs are likely to support to recent rebound but risk aversion wave keeps sellers hopeful.

AUD/JPY keeps bounce off a one-week low around 80.35, picking up bids of late, during Thursday’s Asian session.

The pair dropped to the lowest in a week the previous day, extending Tuesday’s pullback from a three-week top, amid the risk-off mood. However, the bears have recently been probed amid mixed clues, as well as cautious sentiment ahead of important data from Australia’s key customer, namely China.

News of AstraZeneca’s covid vaccine showing 74% efficacy in the large US trial combats a 50% jump in the already record-high daily coronavirus cases from Australia’s Victoria to challenge the prior risk aversion. On the same line is US House Speaker Nancy Pelosi’s optimism to overcome the deadlock concerning the US stimulus and debt ceiling problems that contrasts the recent challenges to the bills, raised by own party members.

It’s worth noting that the pessimism surrounding China remains intact ahead of crucial monthly activity data as not only the Evergrande saga but the power cut problems also challenge Beijing’s economic recovery from the pandemic.

Elsewhere, the US Federal Reserve’s (Fed) tapering concerns, also joined by the key central banks in the West, underpin the risk-off mood amid the virus concerns. Even so, Japan’s readiness to remove the covid-led emergencies in Tokyo and 18 prefectures keeps buyers hopeful.

Against this backdrop, S&P 500 Futures rise 0.40% by the press time while the US 10-year Treasury yields drop 2.5 basis points to 1.51%, extending the previous day’s pullback from a one-year high.

Moving on, China’s official and Caixin PMI data will be important for AUD/JPY as the quote struggle for a clear direction. The official NBS Manufacturing PMI is likely to remain unchanged at 50.1 while Caixin Manufacturing PMI bears an upbeat forecast for August, of 49.5 versus 49.2 prior. Further, the Non-Manufacturing PMI may rise from 47.5 to 52.7 during the stated month. Although market consensus points towards China’s recovery, odds of a negative surprise can’t be ruled out, which in turn could weigh on the pair prices.

Technical analysis

Failures to cross the 200-day EMA during the early week, around 81.00 by the press time, direct AUD/JPY towards July’s low around 79.85.