AUD/JPY drops as Trump ups the ante in trade wars

• Tit-for-tat tariff boost fears of a full-blown trade war.
• Equity index futures drop, Yen finds bids.
• AUD/JPY revisits ascending 5-day MA support.

AUD/JPY fell to ascending 5-day moving average support of 82.02 on fears the tit-for-tat tariffs between the US and China will lead to a full-fledged trade war.

As of writing, the cross is trading at 82.20. The Dow futures fell more than 300 points, sending the Yen higher across the board on news that President Trump has asked the US Treasury to consider imposing tariffs on additional $100 billion worth of imports from China.

The news stoked fears the two of the biggest economies of the world will spiral into a trade war that will crush global growth.

However, a significant minority believes Trump's aggressive posture is merely a negotiating tactic and the two parties will eventually reach a win-win deal. If true, the drop in the US equity index futures could be transient. Thus, Yen bulls need to refrain from being too ambitious.

AUD/JPY Technical Levels

A clear break above 82.65 (previous day's high) would open up upside towards 83.32 (Feb. 14 low) and 83.63 (50-day moving average). On the downside, breach of support at 81.77 (ascending 10-day moving average) could yield a pullback to 81.00 (psychological support) and 80.83 (April 2 low).