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We’ve got a steady stream of economic updates from Australia, China, and Japan that could get AUD/JPY moving as it retests and clings on to a strong area of interest at the moment.

Before moving on, ICYMI, today’s Daily U.S. Session Watchlist looked at NZD/CAD as it nears a range top, 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: 15887.31 +0.22%
FTSE: 7148.01 +0.32%
S&P 500: 4528.81 +0.43%
NASDAQ: 15265.89 +0.90%
US 10-YR: 1.28% -0.032
Bund 10-YR: -0.443% -0.008
UK 10-YR: 0.581% +0.001
JPN 10-YR: 0.011% -0.00
Oil: 69.01 +0.393%
Gold: 1,813.30 -0.34%
Bitcoin: $48,600.00 -0.468%
Ethereum: $3,340.01 +3.64%

Fresh Market Headlines & Economic Data:

S&P 500, Nasdaq hit record highs as tech stocks climb

U.S. pending home sales drop for second straight month in July

Ex-Fed official Lacker warns Powell in ‘tough spot’ on inflation

CDC scientist says there’s limited data to evaluate Covid booster doses for general population

Euro zone bond yields fall, tracking U.S. Treasuries

German inflation hits fresh 13-year high in August

ECB’s Villeroy hints at looming slowdown in pandemic bond-buying

Confidence in Euro-area economy drops on supply squeeze, virus

CDC panel unanimously endorses full approval of Pfizer’s Covid vaccine for people 16 and older

Upcoming Potential Catalysts on the Economic Calendar

Japan Unemployment Rate at 11:30 pm GMT
Japan Industrial Production at 11:50 pm GMT
Australia Inflation Gauge at 1:00 am GMT (Aug. 31)
China Manufacturing & Services PMI at 1:00 am GMT (Aug. 31)
Australia Building Permits, Current Account at 1:30 am GMT (Aug. 31)
Japan Consumer Confidence, Housing Starts at 5:00 am GMT (Aug. 31)
France Inflation, GDP at 6:45 am GMT (Aug. 31)
Germany Unemployment Rate at 7:55 am GMT (Aug. 31)
UK Consumer Credit, Mortgage Approvals at 8:30 am GMT (Aug. 31)
Euro Area Inflation Rate at 9:00 am GMT (Aug. 31)

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, we can see AUD/JPY rally mode, making its way back to a broken support area around the 80.00 major psychological level. With the overall trend since June favoring the bears, the question now is whether or not traders will look at these levels as another opportunity to short the downtrend, or for the pair to start a new leg higher.

Well, we’ve got a slew of economic indicators from Japan, Australia and China that may help with sentiment during the Asia session, with the likely market movers being China manufacturing PMI, Australian housing, and Japanese unemployment data. It’s likely global market sentiment will largely focus on the update from China, while each individual currency may react to their respective country’s data.

With the major trend favoring the bears, we think this could be a short-term opportunity for sellers if China sentiment data comes in weaker-than-expected, not only likely to draw in Aussie sellers, but yen buyers as well looking to lighten up on risk. In this scenario, watch out for bearish reversal patterns at current levels (the broken support-turned-resistance area around 80.00/61% Fib area). The odds of success for sellers increase if we see weaker-than-expected Aussie housing and/or inflation data.

For the bulls, we’d have to see a big positive surprise from China’s PMI data, a low probability scenario at the moment. But if it does happen, traders will be caught off guard and likely drop safe haven assets like the yen, increasing the odds of a sustained upside break of the 80.00 handle on  AUD/JPY. If that plays out, that could draw in both technical and fundamental traders who may believe the world may turn the corner soon on covid-19, and thus a return to global economic growth. That scenario would likely create a very short-term pop that could have legs, at least until we hit the U.S. trading where the focus would turn to U.S. data.