n taking a hit. As a result, AUD/JPY, a particularly risk-sensitive currency pair given the AUD’s high beta toversus the yen’s appeal as a safe-haven asset, has dipped below a key area of support in the 82.60s on Monday. The pair has now even dipped below the 82.50 mark, though the losses are for now being contained as the 21 and 50-day moving averages in the 82.43-82.48 area offer support.
But AUD/JPY’s tumble back from earlier session highs in the 83.30s saw it fall beneath its 200-day moving average at 82.65, which coincided with last week’s lows, a far more significant area of support to break. Should the 82.50 area, which has been an important zone of market balance in recent weeks, break, then AUD/JPY may well continue lower.
The main fundamental catalyst for Monday’s downturn in the pair, and more broadly in the market’s appetite for risk, are fears about Fed tightening and the impact on the US equity space. These fears may well be exaccerbated with a number of key Fed speaks on deck this week , as well as if Wednesday’s release of the December Consumer Price Inflation report comes in as hot as expected. That suggests downside risks for AUD/JPY.
Aussie fundamentals will also be a driver. Australian November Retail Sales figures are out on Tuesday and should show a continued decent pace of recovery from the recent lockdown induced contraction earlier in the year. But the latest numbers pertain to a time before Australia experiences its first serious Covid-19 outbreak, which has been accelerating since December.