North Korea tensions push AUD/JPY below 85.00 levels

Heightened geopolitical tensions following North Korea’s latest missile adventure have strengthened the bid tone around the Japanese Yen in Asia.

AUD/JPY fell to a session low of 85.90 and was last seen working hard to avoid big losses below the key psychological level of 86.00.

A weaker-than-expected China services PMI releases hasn’t had any negative impact on the Aussie so far and that is working in favor of the AUD/JPY. However, the situation may change during the day ahead if the European stock markets respond negatively to the slowdown in the Chinese service sector activity.

The Aussie 10-year bond yield is on the retreat, now trading around 2.576% compared to the session high of 2.6%. The losses in the benchmark bond yield could be an advanced warning that the Aussie side of the story could weaken during the day ahead.

AUD/JPY Technical Levels

The cross currently trades around 85.97 levels. A break above 86.30 (5-DMA) would open up upside towards 87.03 (100% Fib ext. of June low - June 20 high - June 22 low) and 87.49 (Mar 15 high). On the other hand, a breakdown of support at 85.85 (previous day’s low) could yield a pullback to 85.55 (10-DMA) and 85.08 (June 20 high).