AUD/JPY only mildly pressured on weak China data

AUD/JPY is extending losses after the latest data out China showed the pace of expansion in the manufacturing activity slowed in January. 

The Caixin PMI came-in at 51.00, missing the estimated figure of 51.8. Caixin figure is more related to small export oriented firms as opposed to the official PMI, which takes into account the State Owned Enterprises (SOE). 

The slight slowdown in the expansion should not come as a surprise, given that smaller firms have had relatively less access to credit. 

AUD/JPY dropped to a fresh session low of 86.17 following the weak data release. However, the major part of the losses seen today has been due to Yen strength. The bid tone around the Yen strengthened after the Bank of Japan bought fewer bonds than expected. 

AUD/JPY Technical Levels

A break below the psychological figure of 86.00 could yield a re-test of the previous session’s low of 85.83, under which the cross may target 85.35 (50-DMA). On the other hand, a break above 86.52 (previous day’s high) would expose 86.86 (Jan 30 high) above which a major hurdle is seen at 87.09 (Jan 27 high).