AUD/JPY: risk aversion at play? Hourly 50 SMA supports

FXStreet (Guatemala) - AUD/JPY is consolidating the early scores to the downside in a thin opening to the start off the week in Asia ahead of fuller markets returning at the Tokyo open.

AUD/JPY dropped from 87.14 at the start of the month and has printed a low of 86.50 so far. At the same time that we are monitoring the US data this week and holding a positive tone around the economy and the greenback, we have a very close eye on developments around China.

There has been a sell-off in AUD/JPY at the start of the week, and as Ivan Delgado, chief editor at FXStreet explained at time of writing, "AUD/JPY, a key risk barometer for risk sentiment, is down 0.85%, while S&P500 futures are down 1.3%."

AUD/JPY downside open on China

China's economy is dire, and the market's awareness heightened at the start of last week on Black Monday when AUD/JPY lost the 90 handle and traded as low as 81.98. China's government responded by trying to support the stock market through various means, and the PBoC has been easing monetary policy and taking measures to add liquidity into the economy as well as making a more flexible environment for the Yuan to trade within. However, the Chinese government has been reported this weekend to abandon attempts to boost the stock market and this could be creating a risk aversion play through the cross at the start of the week.

AUD/JPY may find support from USD/JPY 200 DMA

USD/JPY is back trading below the 200 SMA on the hourly, but remains in a better bid environment while above the 200 SMA at 120.74 on the daily chart, adding some support to the cross whose own technicals remain better offered while trading below the death cross on the daily sticks at 95.20 and end of June prices. On the hourly chart, the cross is supported by the 50 SMA at 86.39 and 86.05 and is in neutral territory with MACD at 0.0069 at time of writing, down from 0.436 and turning negative.