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AUD/JPY has seen a lot of forex action this week, and it doesn’t look like it’ll end soon with more potential catalysts coming from Australia, China, and Japan within the next session.

Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on EUR/GBP ahead of Brexit & stimulus news, so be sure to check that out to see if there is still a potential play!

Equity Markets Bond Yields Commodities & Crypto
DAX: 12030.28 +3.83%
FTSE: 6224.33 +0.94%
S&P 500: 3068.98 +0.43%
DJIA: 25679.92 +0.80%
US 10-yr 0.667% +0.005
Bund 10-YR -0.415% -0.02
UK 10-YR: 0.224% -0.008
JPN 10-YR: 0.002 +0.001
Oil: 36.21 +2.17%
Gold: 1755.40 +0.29%
Bitcoin: 10141.46 +1.50%
Ethereum: 251.66 +2.52%

Fresh Market Headlines & Economic Data:

US Home prices in April saw biggest gain in 2 years, but they’re expected to drop by next year

New York ISM Current Business Conditions rose 15.2 points to 19.5 in May

US cities erupt in more violence amid threats from Trump

Germany wants to swap EU travel warning for softer guidelines this week

Spanish unemployment rises in May by 26,573 m/m

French Economy Will Contract 11% in 2020, More Hard Days Ahead: Minister

No-Deal Brexit Threat Looms Over Pandemic-Ravaged U.K.

Nationwide HPI shows Annual UK house price growth slows to 1.8%; -1.7% m/m

UK mortgage approvals slumped to record low in April lockdown-BoE

New gross borrowing in the UK fell to £11.8B in April, roughly half its February level

Upcoming Potential Catalysts on the Economic Calendar for U.S. & Asia:

  • API Crude Oil stock change at 8:30 pm GMT
  • Australia Construction index at 10:30 pm GMT
  • Australia Services PMI at 11:00 pm GMT
  • Japan Services PMI at 12:30 am GMT (June 3)
  • Australia GDP at 1:30 am GMT (June 3)
  • China Caixin Services PMI at 1:45 pm GMT (June 3)

What to Watch: AUD/JPY

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

AUD/JPY has been on a tear this past week, riding higher on the “reopening trade“, and picking up speed after today’s RBA monetary policy statement and continued positive data from Australia.

And we may see even more volatility in the upcoming session with a packed economic calendar for the Aussie, most notably the Australian GDP read and the services PMI updates from Australia, China, and Japan.

For you bulls out there, the momentum is on your side, but given that AUD/JPY has rallied more than its weekly ATR of 240 pips from the week open, there is a risk that this rally may run out of steam.

Stochastic is also signaling potentially overbought conditions, and the 76.50 handle marked on the chart above is the Q4 2019 high that could draw in resistance.

With those considerations, it’s probably a good idea to wait for a reaction, and if we do see positive PMI data from Australia and China, then it makes sense to build a long position if support forms from the rising lows up to the 74.00 handle.

For the bears, the risk-on trade has been really strong this week, so you’ll have to see a turn in global risk sentiment before shorting AUD/JPY really makes sense.

If that scenario does play out, on top of weak PMI updates from Asia & Australia, then shorting between 75.00 up to 76.00 makes sense if you’re looking for a counter-trend swing position.