AUD/JPY rebounds sharply as VIX eases, risk reset?

The AUD/JPY cross staged a solid comeback from five-month troughs in the European session, but remains on track to book the second monthly loss in a row.

The rebound is largely seen on the back a turnaround in risk sentiment, with risk-on moods seeping back to markets amid a recovery in treasury yields and Europe equities.

Hence, risk reset, as reflected by a retreat in the CBOE Volatility Index (VIX) futures – a fear gauge, boosts the sentiment around the risk barometer, AUD/JPY. The VIX futures wipe-out gains and dip into the red zone to trade around 12.80 levels.

The AUD/USD pair benefited from a recovery in risk appetite, while the Japanese currency also lost footing. Meanwhile, focus now remains on the Trump-Xi meeting for fresh take on the broader market sentiment, which will eventually impact the prices.

Technical Levels

Higher side: 89.94/84.11 (daily pivot/ 5-DMA), 84.52/54 (Fib R2/ 10-DMA), 85.00 (round number)

Lower side: 83.50 (psychological levels), 83.00 (zero figure), 82.70 (200-DMA)