We’re scoping out AUD/JPY as we have potential economic catalysts from Australia, China & Japan right around the corner.
Intermarket Snapshot
| Equity Markets | Bond Yields | Commodities & Crypto |
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US 10-yr 2.157% +0.016 Bund 10-YR -0.232% -0.23 UK 10-YR: 0.847% +0.007 JPN 10-YR: -0.105% +0.022 |
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Fresh Market Headlines & Economic data:
- US Small business optimism eclipsed pre-shutdown levels, increasing 1.5 points to 105.0 in May
- The US Producer Price Index for final demand rose 0.1% in May; Core PPI moved up 0.4% in May
- Oil prices rise as OPEC supply cuts counter growth concerns
- BoE’s Broadbent not concerned about market view on rates
- Tory leadership rivals split over Brexit deadline
- UK April pay data beats forecasts, employment growth slows
- ECB’s Kazimir saw stimulus decision proves willingness to act
- Germany Gets a Recession Warning as Investor Confidence Plunges
- ECB’s Rehn: tiering, rates cut, more QE all on the table
- Australia business confidence bounces even as activity sags-survey
- New Zealand manufacturing sales rise in first quarter
Upcoming Potential Catalysts on the Forex Calendar:
- New Zealand visitor arrivals at 11:45 pm GMT
- RBA’s Kent speaks in Melbourne at 12:25 am GMT (June 12)
- Australia consumer sentiment at 1:30 am GMT (June 12)
- Japan Core machinery orders & PPI at 12:50 am GMT (June 12)
- China CPI & PPI at 2:30 am GMT (June 12)
- ECB Draghi speaks in Frankfurt at 9:15 am GMT (June 12)
- RBA Ellis speaks in Melbourne at 10:00 am GMT (June 12)
- US consumer price index at 1:30 pm GMT (June 12)
What to Watch: AUD/JPY
Fresh inflation data is on the way for both China and Japan, while Australia will get the latest mood update from consumers in the upcoming Asia session. Inflation and consumer sentiment are both potentially market moving economic indicators for currencies, so there’s a decent shot we could see some volatility in AUD/JPY by the Wednesday U.S. session.
In terms of price action leading up to the events, AUD/JPY seems to have formed a slight descending channel, indicating that the bears have a little bit of control in this market for now. The pair is bouncing higher from the middle of the channel at the moment (likely moving with the improved risk sentiment today), and it’s only one daily ATR away from hitting the top of the descending channel around the 76.00 major psychological level.
It’s likely that if global risk sentiment improves and the upcoming China inflation & Australian consumer sentiment data comes out positive, the market will easily see the top of the channel. At that point, the scenario to watch out for a potential short play is if resistance and reversal candles form around the 76.00, and for the stochastic to start to turn lower from overbought territory. The odds of success for a short play would improve if global risk sentiment turned sour, likely on geopolitical news.
For the bulls, a break of the falling ‘highs’/top of channel is your cue to start paying attention, and if it could hold and bounce off of the 76.00 handle (likely on continued positive global risk sentiment or good economic data) then AUD/JPY could possibly draw in momentum buyers or even profit takers who’ve held the pair short for a while.
