AUD/JPY erases gains on lingering US-China tensions

• AUD/JPY has reversed early gains alongside mixed action in Asian stocks. 
• Lingering US-China tensions are likely to keep risk under pressure. 

The early risk-on tilt seen in the financial markets has faded, as evidenced by AUD/JPY's pullback from the session high of 70.58 to 70.30. The JPY cross is now trading largely unchanged on the day. 

The growth-linked Aussie dollar was better bid during the early Asian trading hours, while the safe-haven US dollar was nursing losses across the board. EUR/USD had jumped by 15 pips to 1.0909. 

However, the early moves have been reversed in the last few minutes, which isn't surprising, given the lingering US-China tensions. China's Foreign Minister on Sunday accused Wahington of damaging relationship with Beijing and pushing the two nations toward a “new cold war”. Both nations have been butting heads of late over the origin of the coronavirus, Beijing's handling of the outbreak, and more recently, over their respective interests in Taiwan and Hong Kong. 

While Asian stocks are trading mixed with Japanese and Australian shares flashing green and the Chinese stocks and Hong Kong shares reporting losses, the average of the major Asian equity indices is down 0.3%. 

Looking forward, the risk is likely to remain under pressure, although big moves may remain elusive, as both the UK and the US are closed on Monday. Also, the futures on the S&P 500 are reporting moderate gains and could restrict losses in AUD/JPY. 

Technical levels

R3 71.65
R2 71.22
R1 70.79
PP 70.37
S1 69.94
S2 69.51
S3 69.08