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Today, we’re looking at a technical setup on AUD/JPY that could see some movement with events on the calendar from Australia and Japan ahead.

Before moving on, ICYMI, today’s Daily U.S. Session Watchlist looked at a setup on USD/CHF ahead of the latest U.S. CPI update, 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: 15150.22 +0.20%
FTSE: 7004.63 +0.82%
S&P 500: 4063.04 -2.14%
NASDAQ: 13031.68 -2.67%
US 10-YR: 1.701% +0.077
Bund 10-YR: -0.117% +0.012
UK 10-YR: 0.892% +0.005
JPN 10-YR: 0.079% +0.009
Oil: 65.82 +0.83%
Gold: 1,817.30 -1.02%
Bitcoin: $54,294.75 -4.22%
Ethereum: $4,062.50 -0.30%

Fresh Market Headlines & Economic Data:

Wall St drops as strong inflation data fuels rate hike bets

U.S. inflation speeds up in April as consumer prices leap 4.2%, fastest since 2008

Fed’s Bostic: U.S. in phase of volatile prices, uncertain labor supply

U.S. April budget deficit narrows as revenues rise, outlays fall -Treasury

Republicans tell Biden they won’t back any tax hikes for recovery plan

France aims to block U.K. finance firms from EU over fishing rights spat

ECB pressed by banks to extend capital relief beyond June

Upcoming Potential Catalysts on the Economic Calendar

New Zealand Food Prices at 10:45 pm GMT
U.K. House Prices at 11:00 pm GMT
Japan Current Account, Bank Lending at 11:50 pm GMT
Australia New Home Sales at 12:00 am GMT (May 13)
Australia Consumer Inflation Expectations at 1:00 am GMT (May 13)
Japan Eco Watchers Survey at 5:00 am GMT (May 13)

What to Watch: AUD/JPY

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

On the one hour chart above, we’ve got AUD/JPY in a downward slope, echoing the risk-off sentiment we’re seeing in the markets this week.

Short-term, that trend lower is likely to continue given the escalated fears of accelerating inflation conditions, which could take AUD/JPY all the way to the major support area around the 84.20 handle. If so, is that a buying opportunity or will a breakdown come next?

Well, we don’t have major events on the forex calendar to likely fuel a strong break one way or another, but the upcoming Australian new home sales and consumer inflation expectations could be enough to at least keep volatility up. Maybe even to fuel a downside break if the Aussie data comes in weaker-than-expected.

If the Aussie data comes in stronger that forecast, and we see a broad shift in risk sentiment towards positive, then watch the 84.20 area for bullish reversal candles.

If those patterns appear, that would likely draw in short-term buyers, both looking to take profit from their shorts and/or fresh longs looking to play the longer-term trend higher.