Is AUD/JPY pointing to risk aversion?

The AUD/JPY cross dropped to a low of 85.06 levels, suggesting the equities and risk assets in general may have a bad day ahead.

The pair is often tracked as a global risk barometer, given the fact that the Aussie dollar is proxy for China, while the Japanese Yen is a classic carry currency.

Eyes China data

The immediate focus is on China data, which is expected to show the consumer price index ticked higher to 0.3% m/m in December. Meanwhile, producer price index is seen rising to 4.5% y/y.

The weaker-than-expected Australia retail sales number is already weighing over the cross.

AUD/JPY Technical Levels

A break below 85.00 (23.6% of Nov 9 low – Dec 15 high) would open the door to 10-DMA level of 84.73. On the higher side, breach of 85.40 (session high) could yield a re-test of 85.92 (previous day’s high).