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We’ve got top tier catalysts ahead from the RBA in the upcoming Asia session, making the recent pullback in AUD/JPY one to watch for potential setups.

Before moving on, ICYMI, today’s Daily U.S. Session Watchlist looked at an opportunity forming on USD/JPY ahead of top tier U.S. business sentiment data, so be sure to check that out to see if there is still a potential play!

Equity Markets Bond Yields Commodities & Crypto
DAX: 14012.82 +1.64%
FTSE: 6588.53 +1.62%
S&P 500: 3901.82 +2.38%
NASDAQ: 13588.83 +3.01%
US 10-YR: 1.419% -0.037
Bund 10-YR: -0.333% +0.003
UK 10-YR: 0.748% -0.011
JPN 10-YR: 0.151% -0.016
Oil: 60.28 -1.98%
Gold: 1,722.90 -0.34%
Bitcoin: 48,837.25 +5.55%
Ethereum: 1,544.08 +7.03%

Fresh Market Headlines & Economic Data:

The J.P.Morgan Global Manufacturing PMI rose to a three-year high at 53.9 in February, up from 53.6 in January

Oil down $1/bbl on Chinese fuel demand doubts, OPEC supply concerns weigh

Canadian manufacturing growth picks up in February: 54.8 in February vs. 54.4 in January

Global bond markets rally as RBA ups bond buys, ECB official urges action to curb rate rise

ISM Manufacturing PMI: 60.8 in February vs. 58.7 in January

IHS Markit U.S. Manufacturing PMI: Production growth near six-year peak but price gauge highest since 2011

Barkin: Fed’s rate guidance is ‘explicit,’ investors should watch outcomes

ECB’s Villeroy signals action to battle threat of rising yields

Upcoming Potential Catalysts on the Economic Calendar

Japan Unemployment rate at 11:30 pm GMT
Japan Capital spending at 11:50 pm GMT
Australia Building Permits, Current Account at 12:30 am GMT (Mar. 2)
Reserve Bank of Australia Interest Rate Decision at 3:30 am GMT (Mar. 2)
German Retail Sales at 7:00 am GMT (Mar. 2)
U.K. Nationwide Housing Prices at 7:00 am GMT (Mar. 2)
Spanish Unemployment Change at 8:00 am GMT (Mar. 2)
German Unemployment Change at 8:55 am GMT (Mar. 2)
Euro area Inflation Rate at 10:00 am GMT (Mar. 2)

What to Watch: AUD/JPY

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

We’ve got a pretty calendar ahead for both the Asia and European trading sessions, but the likely main event is the latest monetary policy statement from the Reserve Bank of Australia.

The event will especially be one of interest this time after the RBA increased bond purchases today, likely to slow down the bond sell-off and rapidly rising yields. This has been damaging to risk-on sentiment, and their comments later in the Asia session could be a catalysts for further Aussie volatility.

We’re looking out for the RBA to comment on potential future actions with regards to the bond market, seeing if they will try to contain rising yields once again. This would likely spark risk-on vibes and a bullish move in the Aussie. If so, what out for AUD/JPY break above the Fibonacci retracement area / moving averages area on the chart above before considering a long position.

Or if the pair is retesting the strong area of interest around the 82.00 major psychological level, look out for bullish reversal candles before considering a long position.

For the bears on AUD/JPY, another spike higher in global bond yields could take down risk assets once again, and if the RBA says they’ll no longer defend against higher bond yields (a low probability scenario at the moment), then look for a fast break lower. A break below the 82.00 handle would likely draw in momentum players, both Aussie bears as well as traders looking for yen’s “safe haven” protection.