AUD/JPY hit 6.5 week low below 50-day MA

• AUD/JPY fell to 86.87 - lowest since Dec. 21.
• Trading below 50-day MA for the first time since Dec. 20.

AUD/JPY is exploring the downside amid the rising yields-led risk aversion in the markets.

The cross, also widely known as the barometer of global risk sentiment, fell to a 6.5 week low of 86.87 in Asia, seemingly due to the 600 point drop in the Dow index on Friday and the negative follow through in the Asian equities today.

It appears the investors are no longer comfortable with the idea of rising bond yields. Friday's upbeat US wage growth numbers pushed the 10-year treasury yield, well above 2.76 percent, confirming the end of a long-term bull market in bonds.

The yield is widely seen rising to 3 percent and beyond in 2018. Further, the yield on the 2-year note is well above the S&P 500 dividend yield. Thus, equities are responding negatively and the USD is better bid against the Aussie dollar. Meanwhile, Yen is somewhat resilient (against USD), courtesy of risk aversion in the equities.

Hence, the AAUD/JPY is feeling the gravitational pull. Currently, AUD/JPY is trading at 86.97, having clocked a high and low of 87.29 and 86.87, respectively.

AUD/JPY Technical Levels

A move below 86.72 (50% Fib R of Nov. 27 low - Jan. 5 high) would expose support at 86.50 (200-day MA) and 86.16 (61.8% Fib R of Nov. 27 low - Jan. 5 high). On the higher side, breach of the hurdle at 87.31 (100-day MA) could yield 87.46 (Jan. 30 low) and 87.60 (5-day MA).