AUD/JPY: Gravity playing its part amid broad risk aversion wave

• AUD/JPY extends the previous downside as headlines concerning the Hong Kong bill add global market pessimism.
• The US President doesn’t think China is stepping up to the level wanted in trade talks.
• Markets ignore Japan’s ruling coalition’s push for a heavy budget.

Adding to the previous disagreements over phase one deal, the US Hosue of Representatives’ approval to the Hong Kong bill offers further weigh on the market’s risk sentiment, which in turn could be witnessed by a downside AUD/JPY quote of 73.40 during Thursday’s Asian session.

The US House of Representatives recently passed the Senate approved Hong Kong Human Rights And Democracy Act. The bill aims as requiring regular reviews of Hong Kong's special financial status and bar exports of many crowd control munitions to the Hong Kong police. The United States (US) President Donald Trump will now have to sign the bill before announcing it as the law. However, Chinese media is already on the wires signaling the dragon nation’s readiness to condemn the US Congress decision.

Elsewhere, the Republican leader’s disappointment with China’s efforts towards the deal, also supported by the CNBC’s story that relied on four people close to the talks, increases the odds against the US-China phase one deal. Further, the German Finance Ministry’s report added pessimism to markets while citing weaker world economy and external risk.

Portraying the trade sentiment, the US 10-year treasury yield and the S&P 500 Futures remain on the back foot.

Traders almost ignored the Nikkei news that mentions Japan’s ruling coalition’s agreement to urge government over 10 trillion Japanese yen (JPY) while concentrating more on Moody’s downbeat analysis of Australian states.

Moving on, the September month All Industry Activity Index from Japan, -0.2% expected versus 0.0% prior, occupies the economic calendar with no major data/events from Australia up for publishing. As a result, trade/political headlines will be the key catalyst of the day.

Technical Analysis

The pair nears multi-month-old rising support line, at 73.53 now, a break of which could aim for monthly low around 73.35 ahead of targeting 73.00 round-figure. On the upside, 73.35 seems to act as nearby key resistance.