AUD/JPY: supply keeps coming in, eyes below daily Bollinger band, targets set on 76 handle

• AUD/JPY marks a fresh short-term low on the daily sticks.
• Australia Retail Sales for July came in at 0.0% m/m vs the expected 0.3%. 
• China's Caixin Manufacturing PMI eases to 50.6 in July, matches estimates.
• Sellers are strong on the daily sticks and a close below 79.50, bears will likely adjust their targets towards. 76.80.

As the market's risk barometer, AUD/JPY is extending the downside and widening the daily Bollinger band having carved out a fresh short-term low today after the release of the Aussie retail sales data that missed expectations. AUD/JPY is currently trading at 79.64 and made a post data low of 79.51 from today's high of 79.97. 

• Australia Retail Sales for July came in at 0.0% m/m vs the expected 0.3%. 
• Australia retail sales drop to 0.0% in July, below estimates
• China's Caixin Manufacturing PMI eases to 50.6 in July, matches estimates

AUD/JPY has been in a straight daily decline since 27th August business but has been in supply since the start of the year whereby the markets have been moving out of the Aussie on the basis that it holds no value in terms of the carry. The RBA has been clear there are no foreseen divergences from their neutral outlook for the foreseeable future. Last month was a big RBA month where the markets had the policy statement, Minutes, SoMP and the semi-annual testimony. Therefore, this next meeting around this week is probably a non-event yet again.

Aussie GDP on the cards this week

Analysts at TD Securities explained that they expect a repeat that rates are on hold for some time. "Could note (1) Q2 GDP remains around 3%/y (won't have the data early) and/or (2) recent higher mortgage rates. Earlier, Q2 govt spend (TD +0.6%pts) could be market-moving if flat or super-strong and median GDP estimate is tweaked." So moving on, markets will look to the next data set being the Q2 GDP numbers. This is where the analysts at TD Securities are slightly more optimistic forecasting +1.0%/qtr vs the markets expectation of +0.7%/qtr: "So far Q2 construction (dwelling +0.2%pt), consumption (+0.4%pt) and capex (IPE -0.5%/q) and next week brings govt spending, inventories and net exports. +1.0%/q is our tracking where we look for inventories to offset a small contribution from trade, and public final demand to add a decent +0.6%pts to GDP. We also look for Q1 to be upgraded, and so annual Q2 GDP to exceed 3%/y."

AUD/JPY levels

After breaking below the 80.50 support level, sellers were a little overstretched at the close last week, with a higher close than the day's low. However, today's price action marks a fresh short-term low within the strong supply chain from a touch below the 50-D SMA. Technicals lean bearish but there should be caution at this stage with a break below the weekly and daily Bollinger bands, plus RSIs are headed into oversold territory - (risk-reward?).  However, sellers are strong on the daily sticks and in a close below 79.50, bears will likely adjust their targets towards 76.80.