AUD/JPY ignores China’s weaker than expected Caixin Manufacturing PMI

• AUD/JPY stays mildly positive despite China’s soft private manufacturing activity number.
• Market’s risk-on sentiment seems to have a limited strength amid Japan off.
• Trade headlines will be in the spotlight.

AUD/JPY seems unfazed by the soft reading of China’s Caixin Manufacturing PMI as it trades near 76.22 during early Thursday.

Following a second positive reading by the official manufacturing activity gauge, China’s Caixin Manufacturing PMI softened to 51.5 versus 51.7 expected and 51.8 prior. Even so, this marks as the fifth reading above 50.00 mark, the level that differentiates contraction from the expansion, by the private manufacturing gauge.

Read: China's Caixin Manufacturing PMI eases to 51.5 in Dec vs. 51.7 expected, Aussie unfazed

Global markets are currently cheering the US-China trade optimism as both parties are near to signing of the phase-one deal, on January 15 as per the US President Donald Trump. Also increasing the optimism are the trade comments from the US President Trump and White House Adviser Peter Navarro.

It should also be noted that 50 basis points (bps) cut by the People’s Bank of China (PBOC) adds to the market’s optimism as it increases the liquidity into the world’s second-largest economy.

As a result, the US 10-year treasury yields are positive around 1.92% whereas S&P 500 Futures also mark 0.20% gains while taking rounds to 3,238.

Looking forward, Japanese markets are off for six days till Monday whereas there are no major Aussie data on the platter to watch. With this, trade headlines and catalysts from China, the largest customer of Australia, will be the key drivers for the AUD/JPY pair.

Technical Analysis

AUD/JPY prices have the immediate support of 10-day SMA and an upward sloping trend line since December 10, around 76.00-75.90, a break of which can drag the pair to 200-day SMA level of 75.00. On the upside, December 27 high of 76.60 acts as nearby resistance to watch.