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Keeping simple today with this short-term technical setup on AUD/JPY, ahead of potential economic catalysts from Japan and China.

Before moving on, ICYMI, today’s Daily U.S. Session Watchlist looked at a descending channel on USD/JPY, 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: 15618.98 -0.32%
FTSE: 7025.43 -0.03%
S&P 500: 4422.30 +0.24%
NASDAQ: 14840.71 +0.03%
US 10-YR: 1.295% +0.01
Bund 10-YR: -0.412% +0.001
UK 10-YR: 0.579% +0.006
JPN 10-YR: 0.014% -0.001
Oil: 72.16 +0.125%
Gold: 1,797.70 -0.228%
Bitcoin: $38,402.87 +11.69%
Ethereum: $2,296.80 +6.59%

Fresh Market Headlines & Economic Data:

S&P 500 ekes out another record as investors gear up for big earnings

Infrastructure Bill stalls as GOP rejects offer from Democrats

U.S. New home sales dropped 6.6% in June vs. +3.4% forecast

Oil falls as coronavirus, slower China imports hit demand

U.S., China still disagree on way forward after tense talks

German business morale down on supply shortages, virus fears

BoE’s Vlieghe says economy needs help for at least several quarters

Bitcoin nears $40,000 as shorts fuel rally on Amazon speculation

Tether executives said to face criminal probe into bank fraud

Gold edges lower as investors cautiously eye Fed meeting

Upcoming Potential Catalysts on the Economic Calendar

Japan Services PPI at 11:50 pm GMT
China Industrial Profits at 1:30 am GMT (July 27)
Bank of Japan Kuroda speech at 7:30 am GMT (July 27)

What to Watch: AUD/JPY

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

We’ve got little in the way of major catalysts ahead on the forex calendar, but what we do have could provide a little bit of volatility in the short-term for AUD/JPY.

Japanese services PPI and China’s Industrial profits aren’t typically market movers, but they may help if broad risk sentiment picks up one way or the other.

The more notable event is the speech from Bank of Japan Governor Haruhiko Kuroda, who will likely be closely watched for any comments signaling that further easing may be needed if pandemic conditions in Japan worsen.

Looking at the one-hour chart above, we’ve got textbook technical setups that could draw in traders from both sides, depending on how the scheduled events, or more likely, broad risk sentiment plays out.

If markets lean towards negative risk sentiment (and/or China data disappoints), then traders may hit that bearish technical setup consisting of resistance forming at the Fibonacci retracement area/falling ‘highs’/broken support area around the 81.50 handle.

Check out our new FX Market Movers tool to quickly see which currency pairs have gone up or down significantly over the course of the trading day. 🎢

And of course, if broad risk sentiment (and/or China industrial profits data) leans positive in the upcoming session, then a break above the falling trendline/Fibonacci retracement area is likely to draw in AUD/JPY bulls for a potential short-term momentum trade higher.