AUD/JPY is trending lower and all-time lows near 55.00 could become the target if the U.S.-China trade war escalates.
The trade war is starting to bite and global growth fears have taken bond yields to levels that seemed inconceivable at the start of 2019 . Negotiations for a deal between the U.S. and China appear to be on ice for the rest of 2019, as both sides dig in for a protracted fight nL4N257086.
Equity markets are no longer getting a boost from dovish central bank expectations and Wall Street is starting to move in lock-step with U.S. Treasury yields .
Emerging markets are beginning to quiver and the hugely negative reaction to the election in Argentina and jitters over the escalating political violence in Hong Kong might be an indication there is worse to come for EM nL4N2583HS.
The emerging market ETF (EEM) is down over 13% from its April peak and is flat for the year.
Investors have yet to capitulate and a much deeper slide is likely if the U.S.-China trade war escalation forces a rethink. As the FX market's fear gauge, the AUD/JPY could dive if investors pile into safe havens. The cross has technical support at the 76.4 Fibo of the 55.10-105.45 move at 67.00 - a break below will put the all-time low around 55.10 in focus.
A break above the descending 10-day MA (72.13) would suggest momentum to the downside is waning.