AUD/JPY bears look to 50% retracement target, G20 in focus

• AUD/JPY consolidates as traders move towards the exits ahead of the G20.
• AUD/JPY downside is compelling on G20 risk, technically bound for 74.80 50% retracement and prior resistance.

AUD/JPY is currently trading at  75.45, having travelled between 75.21 and 75.62 and consolidating as markets move in to wait and see mode ahead of this weekend's G20. 

The stakes and anticipation are at a high considering the importance of the summit between Trump and Xi whereby the fate of the global economy hangs in the balance of whether a trade deal between Washington and Beijing will eventually be put together. However, the most that the markets are now expecting from this meeting will be the catalyst towards a deal with  Merrill Lynch predicting that negotiations could “end in another ceasefire, with both sides delaying additional tariffs”.

The Wall Street Journal reported that China wants to make sure that the U.S. remove its ban on the sale of U.S. technology to Huawei Technologies Co. as a precondition in trade talks. Furthermore, President Xi is said to take a "confrontational tone" with Trump. 

"No Chinese official now speaks with such optimism. With dozens of hours left before Xi-Trump summit, Chinese state media has been keeping criticizing the US harshly, a situation that never happened in the previous China-US summits," Hu Xijin, Chief in Editor for The Global Times warned earlier this week. More recently tweeting, "Regarding the China-US summit, only two things are certain to me:1, The summit will be held. 2, China will stick firm to its core interests no matter what is the result. In the future, China will focus more on doing its own things well. This principle won't change any more."

Comments from reported to come from U.S. officials in recent trade say they're not expecting any trade breakthrough in talks with President Xi and it's unlikely they'll agree to any request to lift the ban on Huawei products. 

FX implications

Markets are in consolidation but the yen can attract a bid as we head into the event of the G20 as investors move away from global equities. The Australian dollar trades as a proxy to trade war risk, benefitting from progress and vice versa. 

AUD/JPY levels

The cross has met the 200-D EMA and bulls have eyes are set on the 76 handle meeting the 50-D EMA. On the downside, 74.80 is the 50% retracement of recent swing lows and highs and comes as prior resistance level ahead of 73.93 as the daily swing low target.