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With trade negotiations between the U.S. and China making a bit of progress today, I’ve still got my eye on this AUD/JPY channel and a fresh set of entries.

Currency Snapshot:

Asian Session Performance of Major Pairs from MarketMilk
Asian Session Performance of Major Pairs from MarketMilk

Fresh Market Headlines & Economic Data:

Upcoming Potential Catalysts on the Forex Calendar:

  • German trade balance at 7:00 am GMT
  • French industrial production & private payrolls at 7:45 am GMT
  • FOMC member Williams’ testimony at 1:00 pm GMT
  • Canadian jobs report at 1:30 pm GMT

What to Watch: AUD/JPY

AUD/JPY 1-hour Forex Chart
AUD/JPY 1-hour Forex Chart

I’ve already had this pair on my watchlist for the previous U.S. trading session, and I think it deserves a closer look again today as trade deal updates have been hogging the headlines.

There are no major reports lined up for the London session, so market watchers could have their eyes and ears peeled for trade-related updates for the next few hours.

Word through the forex grapevine is that the U.S. and China are prepping to roll back some tariffs in tranches, depending on how the first phase of the deal pans out. However, risk assets had their rallies cut short when it was also reported that this idea faces stiff internal opposition within the U.S. administration.

This has allowed AUD/JPY to retreat from a test of the resistance back to its mid-channel area of interest, which happens to line up with the 50% retracement level. If risk sentiment improves throughout the day, this could be enough to hold as support and push price back to the swing high at 75.60 or the channel top closer to the 76.00 barrier.

On the other hand, more doubts that the U.S. and China could finalize a deal before the end of the month could take this pair much lower, possibly leading to a test of the channel bottom below the 75.00 mark. The trend strength analysis suggests that the bullish move might still carry on.

AUD Pairs Trend Strength
AUD Pairs Trend Strength

Also, note that the RBA monetary policy statement released in the Asian session hinted that the central bank is hesitant to lower rates further. Apart from seeing some signs of growth emerging from a soft patch and resilience in the labor market, officials are also concerned that further easing could convey an overly negative view of performance.

AUDJPY Volatility Profile from MarketMillk
AUDJPY Volatility Profile from MarketMillk

Looking at the average volatility of AUDJPY over the past 30 days reveals that the pair typically moves by less than 60 pips on Fridays. Going for a long play around current levels (75.15) with a 60-pip stop could be enough to weather a potentially larger correction and make it to the swing high target on a bounce.