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AUD/JPY prints a three-day downtrend near 88.00 as conflicting Australian trade data and declining Treasury bond yields favor bears on Thursday morning.

In terms of Australian trade data, the headline Trade Balance improved to $13.870 billion, compared to $11.100 billion expected and $11.680 billion previously. However, Exports and Imports fell to -3.0% and -9.0%, respectively, from 1.0% and 5.0% previously.

In addition to the contradictory Australian trade data, the Reserve Bank of Australia's (RBA) dovish stance versus the Bank of Japan's (BoJ) departure from easy money policy appears to exert downward pressure on the AUD/JPY exchange rate.

Governor Philip Lowe of the Reserve Bank of Australia (RBA) attempted to appease conservatives on Wednesday, following the RBA's halt in rate hikes. The policymaker ruled out rate cuts and stated, "The balance of risks favors additional rate hikes."

On the other hand, rumors regarding the Bank of Japan's (BoJ) further revision of the Yield Curve Control (YCC) policy under the new Governor allow the Japanese Yen (JPY) to remain firm.

Notably, the challenges to sentiment, primarily from China and the United States, also give the bears reason for optimism. Recent discussions between US House of Representatives Speaker Kevin McCarthy and Taiwanese President Tsai Ing-Wen have reignited Sino-American tensions. On the other hand, a string of negative employment indicators from the United States raises recession concerns, agitates sentiment, and weighs on the risk-barometer AUD/JPY pair.

While reflecting market sentiment, S&P 500 Futures record modest losses while tracking Wall Street benchmarks. However, yields continue to exert downward pressure on the AUD/JPY. In spite of this, the benchmark 10-year US Treasury bond yields fell for five consecutive days to a seven-month low on Wednesday, while the two-year counterpart posted a four-day downtrend before rebounding off 3.79%.

Moving forward, risk catalysts will be crucial for new directions despite a light calendar and Australia's long weekend. China-related news and recession discussions will garner the most attention.

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