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The downtrend move in AUD/JPY has settled down a bit as a major psychological handle holds as support. Will Omicron variant fears and Australian economic updates be enough to push the pair lower?

Before moving on, ICYMI, today’s Daily U.S. Session Watchlist looked at the recent dip in USD/JPY ahead of ADP data, so be sure to check that out to see if there is still a potential play!

Intermarket Update:

Equity Markets Bond Yields Commodities & Crypto
DAX: 15,472.67 +2.47%
FTSE: 7,168.68 +1.55%
S&P 500: 4,513.04 -1.18%
NASDAQ: 15,254.05 -1.83%
US 10-YR: 1.414% -0.027
Bund 10-YR: -0.347% -0.015
UK 10-YR: 0.813% -0.008
JPN 10-YR: 0.056% +0.002
Oil: 65.25 -1.41%
Gold: 1,782.30 +0.32%
Bitcoin: $56,706.64 -1.37%
Ether: $4,548.71 -2.25%
Solana: $222.59 +4.24%

Fresh Market Headlines and Economic Data:

U.S. confirms nation’s first case of omicron Covid variant in Northern California

ADP National Employment Report: Private Sector Employment Increased by 534,000 Jobs in November

ISM Manufacturing PMI rises to 61.1 in November as expected

Canada Building Permits Rise 1.3% m/m in October

Oil hits $65/barrel on rising Omicron variant fears

BoE’s Bailey says economic impact of COVID remains strong

Facebook/Meta undoes crypto ad ban

JP Morgan Global Manufacturing PMI ticked lower to 54.2

IHS Markit US Manufacturing PMI drops to 11-month low at 58.3

Upcoming Potential Catalysts on the Economic Calendar

Australia Trade Balance, Retail Sales, Home Loans at 12:30 am GMT (Dec. 2)
Bank of Japan Suzuki speech at 1:30 am GMT (Dec. 2)
Japan Consumer Confidence at 5:00 am GMT (Dec. 2)
Euro area Unemployment Rate, PPI at 10:00 am GMT (Dec. 2)

If you’re not familiar with the forex market’s main trading sessions, check out our Forex Market Hours tool.

What to Watch: AUD/JPY

AUD/JPY 1-Hour Forex Chart
AUD/JPY 1-Hour Forex Chart

On the one hour chart above of AUD/JPY, we’ve got a simple technical setup as the pair’s current downtrend has stalled into a consolidation pattern over the past few sessions. And with the market back to testing the support area of the range, the question now is whether we’ll see buyers jump back in or will support finally break?

Well, it looks like Omicron variant news dominated broad risk sentiment late in the Wednesday U.S. session, so it’s possible that could carry over to the Asia and London session and push the pair lower.

We’ve also got mid-tier Australian economic updates coming in the Asia session that may influence the Aussie dollar. If we get disappointing reads, especially with retail sales data, that could soften expectations for monetary policy tightening, leading to Aussie weakness.

If so, then that 80.00 handle may not hold for long, and if it breaks, that could draw in momentum sellers, especially in a risk-off environment that usually favors the yen over the other majors.

Now, if we get surprise positive reads and headlines that the Omicron variant is not as severe as the Delta variant, and/or the hospitalization rate with Omicron seems to be lower than other variants, that could spark a broad risk rally in financial markets.

If the 80.00 support area holds and this scenario plays out, that could draw in buyers quickly into AUD/JPY, and with a daily ATR of around 90 pips, the 81.00 could be within a session or two with a strong bounce.