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There are a couple of potentially market-moving economic reports on tap, but traders will likely keep their focus on the tighter-than-expected U.S. election results.

Will today’s themes lead to AUD/JPY extending its downtrend?

Before we talk setups, check out the headlines that dominated Asian session trading:

Major Forex Pairs Price Performance from MarketMilk
Major Forex Pairs Price Performance from MarketMilk

Upcoming Potential Catalysts on the Economic Calendar:

  • Spain’s services PMI at 8:15 am GMT
  • Italy’s services PMI at 8:45 am GMT
  • Final services PMIs for France, Germany, Eurozone, and the U.K. on tap
  • U.S. ADP report at 1:15 pm GMT
  • Canada’s trade balance at 1:30 pm GMT
  • U.S. ISM services PMI at 3:00 pm GMT
  • U.S. election results under the spotlight

What to Watch: AUD/JPY

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

Major eurozone economies and the U.S. are printing initial and final services PMIs today while Uncle Sam is set to release its ADP report (it IS NFP week, ya know).

But reports schmorts. All eyes will likely continue to be on the U.S. Presidential elections, which did not yield a blue wave that markets had priced in the last few days.

As of writing, the Democrats are set to retain control of the Lower House while both parties have flipped seats in the Senate. Biden is currently in the lead with 224 to Trump’s 213 but key swing states are more favorable to Trump than what polls had shown.

If the world needs to wait days before the U.S.’ next leader is decided, then the uncertainty could drag AUD/JPY deeper into its downtrend. As you can see, the pair bounced around the 75.00 major psychological handle near a descending channel resistance.

But if one of the key swing states puts one candidate firmly over the 270 mark, or if one candidate concedes in the next few trading sessions, then we could see some risk rally as traders have a better idea of which policies to price in.

In this case, AUD/JPY could pop above its descending channel resistance to hit the 78.00 previous inflection point.