AUD/JPY in focus as shutdown hopes clash with AI repricing risk

• U.S. government shutdown deal may be nearing, lifting U.S. dollar
• Kimi model adds AI disruption risk to U.S. tech
• Asian tech shares in focus Monday
• AUD/JPY in focus given competing risk forces

Summary

Traders face a mixed bag coming out of the weekend. While optimism around a potential end to the U.S. government shutdown has helped spark a minor bid in the dollar, the release of Moonshot’s Kimi K2 Thinking model late last week adds another layer of uncertainty. A similar announcement from DeepSeek earlier this year took days to gain traction before triggering sharp declines in U.S. tech stocks. That makes the performance of Asian tech shares on Monday worth watching, especially with risk appetite holding up for now. Any fresh developments on the shutdown or signs of repricing in AI-linked names could quickly shift the tone.

For those watching broader sentiment, AUD/JPY remains a clean read, pairing a cyclical risk proxy against a funding currency.

Political Gridlock Nearing End?

The stalemate between Republicans and Democrats that has contributed to the latest U.S. government shutdown becoming the longest in history may be nearing its end, helping spark a minor bid in the U.S. dollar in early trade in Asia. Senate Republican leader John Thune suggested Sunday that a deal was “coming together,” with a test vote planned on a narrow spending package that would fund key agencies through late January and others through September 2026.

The news has helped ease concerns about the economic fallout from the shutdown. A group of Senate Democrats is reportedly open to backing the deal if protections for federal workers are included. That could be enough to reach the 60-vote threshold, though House Democrats remain a hurdle, continuing to push for a one-year extension of Obamacare subsidies.

Even if the Senate vote passes, there’s no guarantee the shutdown ends quickly. The White House has offered little in the way of compromise, and the longer the impasse drags on, the greater the risk to consumer sentiment and broader economic momentum. With air travel disruptions mounting and contingency funds running thin, pressure is building for a resolution before the Thanksgiving holiday.

Deepseek Repeat?

Chinese startup Moonshot has released its latest AI model, Kimi K2 Thinking, claiming it outperforms ChatGPT in "agentic reasoning." That means is understands user requests without needing intricate detail on what is required. Trained for just $4.6 million, it can reportedly autonomously select hundreds of tools to complete tasks. Backed by Alibaba and fully open-source, it’s another direct challenge to the capital-heavy models dominating the U.S. market.

The timing is notable. Nvidia’s Jensen Huang warned this week that the U.S. risks falling behind China in AI. The launch echoes DeepSeek’s January debut, which triggered a sharp selloff in U.S. tech stocks as investors reassessed the value of billion-dollar AI investments.

If Kimi gains traction, it could spark a similar reaction. With Chinese models proving viable at a fraction of the cost, pressure is building on U.S. firms to justify their spending. As such, another repricing event may not be far off.

AUD/JPY a Reliable Risk Barometer

Source: TradingView

When it comes to the FX universe, AUD/JPY is arguably the cleanest read on broader sentiment, pairing a cyclical risk proxy in the Australian dollar against a funding currency in the Japanese yen. When risk appetite is buoyant, the pair tends to rip higher. But when sentiment sours, it often resembles Wile E. Coyote going off the cliff in pursuit of the roadrunner. Up via the stairs, down via the elevator, making it a pair worth watching on days like this.

Late last week, AUD/JPY bounced twice from 98.82, making that the first downside level of note. The 50-day moving average at 97.33 and uptrend support just below 97.00 are next in line. On the topside, 100.30 has acted as both support and resistance over the past month, putting it on the radar. A break above would bring the October 30 swing high of 101.21 into play, followed by the November 2024 peak at 102.40.

From a momentum perspective, signals from RSI (14) and MACD suggest caution for longs. Both are trending lower while still in bullish territory, pointing to fading upside strength. It’s not a bearish message yet, but that could change quickly if price starts to slip.