Rising expectations for falling RBA rates have dragged 2-year AUD-JPY government yield spreads to a fresh historical low near 1.2% after disappointing Australian jobs data overnight nL4N23J47A, which has pulled AUD/JPY to lows not seen since the Jan. 3 flash-crash.
This currency pair has been hit particularly hard by the escalation of U.S.-China trade tariffs and protectionist sanctions, falling more than 7% from April 24's 2019 peak at 80.71 to today's current low of 74.77.
This week's fall and the expected RBA rate cut in either July or August sent the All Ords index to post-GFC highs yesterday, but that optimism and still fairly strong demand for iron ore and coal from China haven't been enough to steady AUD/JPY.
Given a highly positive correlation with AUD/USD , Friday's U.S. retail sales report and the FOMC on June 19 could help or hinder the beleaguered AUD/JPY.
The bigger issue for AUD/JPY is whether this year's flash-crash low and the 2016 global derisking nadir at 73.07/21 will eventually be broken and closed below amid a new global derisking fright or will trade-related angst dissipate after a potential Trump-Xi meeting in Osaka on June 28-29.