AUD/JPY dips below 81.00 on risk aversion

• Steep losses in US tech stocks put a bid under the Japanese Yen.
• Aussie drops on concerns of US-China trade war.
• Focus on the RBA rate decision.

AUD/JPY fell below 81.00 in the overnight trade, tracking the decline in the US stocks.

The Dow Jones Industrial Average (DJIA) dropped 1.9 percent and the broader S&P 500 index fell 2.2 percent. Meanwhile, amazon shares dropped 5 percent, dragging the tech-heavy Nasdaq index down with it.

Consequently, the anti-risk Japanese Yen strengthened across the board. Also, stocks and Australia dollar came under pressure on reports Chinese Ministry of Finance is increasing tariffs on up to 128 US products, including frozen pork, wine, aluminum scrap, and certain fruits and nuts.

As of writing, the currency pair is trading at 81.06. The recovery from the overnight low of 80.83 is backed by a 0.30 percent rise in the S&P 500 futures. The Japanese Tankan index released earlier today showed the companies expect consumer prices to rise an average 0.8 percent a year from now, unchanged from their projection three months ago. Thus, Yen crosses hardly moved on Tankan release.

Focus on RBA

The Reserve Bank of Australia (RBA) is expected to keep rates unchanged and will likely reiterate that lift off (rate hike) is still a long way off. That said, the bid tone around the AUD will likely strengthen if the tone of the policy statement boosts the odds of a 2018 interest rate hike.

AUD/JPY Technical Levels

The pullback from 81.97 (March 28 high) to 80.83 has neutralized the immediate bullish outlook, although only a close below 80.50 (recent low) would revive the bearish outlook and expose support at 80.00 (psychological support) and 79.21 (January 2016 low).

On the higher side, a clear move above 81.97 (March 28 high) would add credence to bullish RSI divergence seen on the daily chart and may yield rally to 82.58 (March 21 high) and 83.95 (50-day MA).