AUD/JPY declines below 106.50 on safe-haven flows, Australian employment data in focus

The AUD/JPY cross loses traction to around 106.45 during the early European session on Tuesday. The Japanese Yen (JPY) strengthens against the Australian Dollar (AUD) as traders pile into safe-haven currencies amid US President Donald Trump's renewed tariff threats. 

Over the weekend, Trump threatened to impose tariffs on eight European nations that oppose his plans to take control of Greenland. It would rise to 25% if an agreement is not reached by June 1. The US President is scheduled to talk about Greenland in Davos on Wednesday. Fears of a major US-EU trade war could boost the safe-haven currencies, such as the Japanese Yen and create a headwind for the cross in the near term. 

On the other hand, concerns about Japan's fiscal position might cap the upside for the JPY. Japan’s Prime Minister Sanae Takaichi on Monday called snap elections for February 8 and pledged a wave of measures to loosen fiscal policy. Takaichi’s plans to cut taxes and boost spending are raising doubts about the financial health of Japan. 

Traders will take more cues from the Australian employment data on Friday. The Unemployment Rate is expected to tick up to 4.4% in December from 4.3% in November. Employment Change is projected to show 30K job gains during the same period. Any signs of an improving Australian labor market could help limit the Aussie’s losses in the near term.