AUD/JPY bears approach 93.00 on Australia’s first Retail Sales contraction in 2022, risk-off mood

• AUD/JPY remains pressured, prints the biggest intraday loss in two weeks.
• Australia’s Retail Sales registered the first contraction of 2022 in October.
• China’s Covid conditions and protests against the Zero-Covid policy weigh on the sentiment.
• Downbeat yields also keep AUD/JPY bears hopeful ahead of the key data/events.

AUD/JPY braces for the biggest daily loss as it drops to 93.30 during the aftermath of disappointing Australia Retail Sales figure, published early Monday. Also weighing on the risk-barometer pair is the downbeat sentiment, mainly due to headlines surrounding China.

Australia’s Retail Sales marked a negative growth of 0.2% MoM for October versus the 0.4% expected expansion and 0.6% previous increase. “Australian retail sales suffered their first fall of 2022 in October as rising prices and higher interest rates finally seemed to have an impact on spending power, a surprisingly soft result that supports a slower pace of rate hikes,” mentioned Reuters after the downbeat Aussie data.

The downbeat data justifies the early-day comments from Reserve Bank of Australia (RBA) Governor Philip Lowe and keep the AUD/JPY bears hopeful.

Also read: RBA Lowe: Worries about the housing supply as the population grows

Elsewhere, protests against China’s Zero-Covid policy in Shanghai and Beijing gain the market’s attention and weigh on the risk appetite, as well as on the AUD/JPY prices. China reported an all-time high of COVID-19 daily cases with nearly 40,000 new infections on Saturday. The dragon nation has been using the stringent policy to limit the virus spread but the outcome hasn’t been a positive one so far. Meanwhile, a deadly fire in a building was allegedly linked to the virus-linked lockdown measures and resulted in mass protests in Beijing and Shanghai.

It’s worth noting that the downbeat performance of the US Treasury yields also weighs on the AUD/JPY prices. As per the latest readings, the benchmark US 10-year Treasury yields dropped two basis points (bps) to 3.68%. In doing so, the key bond coupons remain pressured after declining in the last three weeks.

Looking forward, the risk catalysts are likely to direct short-term AUD/JPY move amid a light calendar for Monday. However, Australia’s monthly inflation data, comments from RBA Governor Philip Lowe and Fed Chair Jerome Powell, as well as Friday’s US employment report for November, will be crucial for a clear guide.

Technical analysis

A U-turn from the 21-DMA, around 94.00 by the press time, joins the AUD/JPY pair’s downside break of a six-week-old ascending trend line, close to 93.60, to keep the bears hopeful of visiting the 93.00 round figure.