Despite a little bit of slowing, the risk-off trade is still alive and well, making the downtrend in AUD/JPY one to watch ahead of Asia region economic updates.
Intermarket Snapshot
| Equity Markets | Bond Yields | Commodities & Crypto |
| DAX: 11639.97 +0.62% FTSE: 7182.36 +0.15% S&P 500: 2859.70 -0.77% DJIA: 25728.46 -1.16% |
US 10-yr 1.611% -0.128 Bund 10-YR -0.601% -0.063 UK 10-YR: 0.458% -0.056 JPN 10-YR: -0.197% -0.012 |
Oil: 52.22 -2.63% Gold: 1515.00 +2.08% Bitcoin: 12063.00 +5.95% Etherium: 229.45 +1.76% |
Fresh Market Headlines & Economic Data:
- Global Easing Gathers Pace as New Zealand Shocks With Bigger Cut
- India central bank cuts rates by 35 basis points to speed up growth
- Thai central bank unexpectedly cuts key rate, worried by baht strength
- Oil slumps to new seven-month low on trade tensions
- Scary’ German output figures propel recession fears
- U.K. House Prices Slide for a Second Month in July, Halifax Says
Upcoming Potential Catalysts on the Forex Calendar:
- U.S. consumer credit at 8:00 pm GMT
- UK RICS Housing survey at 12:01 am GMT (Aug. 8)
- Japan bank lending & current account at 12:50 am GMT (Aug. 8)
- China trade balance, new loans, M2 money supply (Tentative Aug. 8)
- Canada house prices at 1:30 pm GMT (Aug. 8)
What to Watch: AUD/JPY
The economic calendar is a little bit light on highly probable market moving events, which means the current driving themes of geopolitical risk (mainly U.S.-China trade war), central bank interest rate cuts, falling bond yields, and economic growth concerns should hold over the session or two unless we see some sort of geopolitical surprise.
We think AUD/JPY is the pair to watch in this environment, and besides the main driving themes mentioned earlier to keep volatility up, we’ve got mid-to-low tier economic updates from China and Japan to potentially give the pair a boost in action.
For AUD/JPY bears, you’ve got the edge with both fundie and technical factors in your favor, and speaking technicals, we can see the pair has been in a strong downtrend, albeit slowing a bit in the past couple of sessions. This has formed somewhat of a descending triangle with falling ‘highs’ approaching support just above the 71.00 handle. For conservative traders, the bounce could continue up to the area between 71.50 – 72.00 where we meet the falling ‘highs’ pattern; look for short reversal patterns there. For the more aggressive, a break below 71.00 could be the signal to start planning that short position.
For AUD/JPY bulls, only a surprise geoplitical event would likely be able to break the downtrend, which would likely be some sort of trade war truce between the U.S. and China–very, very unlikely at the moment to happen before the end of the week. But if we are surprised with that scenario, a break above 72.00 is your cue to get interested in a long position for what would likely be a fast move to the upside.
