Global risk sentiment is already on the move, and with economic updates from Australia, China and Japan ahead, these textbook technical setups on AUD/JPY are some of the most appealing setups to start off the new trading week.
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Fresh Market Headlines & Economic Data:
- China Narrows Scope for Trade Deal With U.S. Ahead of Talks
- Oil prices up as U.S.-China trade talks loom, supply issues mount
- Low inflation? Nothing to worry about, Fed’s George says
- Scottish court rejects legal bid to force PM Johnson to seek Brexit delay
- Britain’s Johnson tells EU: Brexit ball is in your court now
- U.K. House prices in September 2019 were 1.1% higher y/y, -0.4% m/m
- BRC Retail Sales Monitor: Down -1.7% in Sept. m/m; Spectre of no deal holds back spending
- The Eurozone Sentix Investor Confidence continues its fall to -16.8; “There is no positive reaction to the central banks’ aid measures”
- The AIG Australian Performance of Construction Index: down by 2.0 points to 42.6 (seasonally adjusted) in Sept. from the previous month
- Key Japan economic index falls, government changes view to ‘worsening’
- Japan says it will sign trade agreement with U.S. in Washington today
Upcoming Potential Catalysts on the Forex Calendar:
- Japan Earnings & Household spending at 12:30 am GMT (Oct. 8)
- Japan Current account at 12:50 am GMT (Oct. 8)
- Australia Business confidence & Job ads at 1:30 am GMT (Oct. 8)
- China Caixin services PMI at 2:45 am GMT (Oct. 8)
- Japan Economy Watchers Survey at 6:00 am GMT (Oct. 8)
- Swiss Unemployment rate at 6:45 am GMT (Oct. 8)
- German Industrial production at 7:00 am GMT (Oct. 8)
- French Trade balance & Current account at 7:45 am GMT (Oct. 8)
- BOE’s Tenreyro speaks in Frankfurt at 10:30 am GMT (Oct. 8)
- U.S. Small business optimism at 11:00 am GMT (Oct. 8)
- Canada Housing starts & Building permits at 1:15 pm GMT (Oct. 8)
- U.S. Producer prices at 1:30 pm GMT (Oct. 8)
What to Watch: AUD/JPY
Somewhat of a busy economic calendar ahead, but we’ve got mainly low tier events so the expectations aren’t very high of big market moves in the upcoming session. Out of the group, it’s likely the best chance of a pickup in volatility could come from Australian business confidence data and the Caixin China services PMI read, making the Aussie the currency to watch for the next session.
And we’ll pair this with the Japanese yen, always a potential mover given it’s strong negative correlation with global risk sentiment, and it’s possible it could see some volatility from the upcoming household earnings/spending data, albeit very, very unlikley.
Looking at AUD/JPY’s price action on the one hour chart above, the pair is currently bouncing off of a recent downswing move from 73.30 to a low of around 71.75. Resistance against the bounce seems to have already formed around the Fibonacci retracement area (72.34 – 72.71) of the downswing move, so it’s possible that the return to the downtrend may have already occurred.
If you’re a bearish on AUD/JPY based on the global risk environment and/or the upcoming economic updates from Australian and Japan, you may want to consider a retest and hold of the Fibonacci area/broken support area (72.50 – 72.70) above before putting your short plan together. If you’re more aggressive, scaling at current market levels up to that broken resistance area does make sense if you think the pair will continue the recent downtrend and create new lows.
If you’re a bullish on AUD/JPY on the belief we’ll see positive geopolitical/economic updates, then a buy area from current levels down to 71.75 makes sense, but given the current trend lower, it would be more prudent for a retest of the recent swing lows and bullish reversal patterns to form. Given the daily ATR of around 60 – 70 pips, you could create a long position at that level with a favorable potential return-on-risk if the geopolitical/economic updates did surprise positive within the next session or two.