AUD/JPY tracks US Treasury yields to take offers below 81.00

• AUD/JPY reverses the previous day’s bounce off one-week low.
• Market sentiment remains sour despite Fed’s dovish tilt, progress US infrastructure spending amid Delta covid variant woes.
• NSW reports the highest covid daily infection since March 2020.
• Second-tier Aussie data, US GDP eyed for fresh impulse.

AUD/JPY takes offers around an intraday low of 80.85m, down 0.28% on a day, during Thursday’s Asian session. In doing so, the cross-currency pair fails to extend Wednesday’s recovery moves from a one-week low amid downbeat US Treasury yields.

The US 10-year Treasury yields drop three basis points (bps) to 1.23% by the press time as risk-off escalates amid downbeat virus updates. Also portraying the dull sentiment is the 0.10% intraday loss of S&P 500 Futures.

Australia’s New South Wales (NSW) conveyed 239 new cases, the highest figures in 16 months, fueling the national number to the August 2020 levels. On the contrary, Victoria marked seven new cases and extended the weekly south-run but was mostly ignored. On the other hand, Japan's Kyodo News said, "Japan's daily total of COVID-19 cases topped 9,000 for the first time on Wednesday, with a surge in infections in Tokyo casting a pall over the Olympics and putting pressure on the government of Prime Minister Yoshihide Suga to take stronger countermeasures."

Also positive for the market sentiment, as well as for the AUD/JPY, could be the US policymakers’ asset to begin a debate on President Joe Biden’s $1.2 trillion infrastructure spending plan. The procedural votes helped Democrats to kick-start negotiations on one more stimulus package.

Elsewhere, the US Federal Open Market Committee’s (FOMC) inaction and comments like “continuing economic improvement,” also should have brightened the market’s mood.

It’s worth noting that the pair cheered firmer Treasury yields and Aussie inflation data the previous day and awaits Australia Import-Export Price Index for Q2 of late. Also in the publishing pipeline is the preliminary reading of the US Q2 GDP, expected 8.6% annualized versus 6.4% prior.

Read: US Q2 GDP Preview: Economy to continue to expand at strong pace, eyes on FOMC

Technical analysis

Failures to cross a two-week-old falling trend line resistance direction AUD/JPY prices towards the monthly low near 79.85. However, 80.60 and the 80.00 threshold may offer intermediate halts during the fall.