For the last watchlist post of the week, we’re checking out the action in AUD/JPY. The bulls are in firm control with geopolitics turning productive and from positive reaction to Aussie jobs data. Looking forward, will those themes continue and will Chinese data keep volatility bid?
Intermarket Snapshot
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Fresh Market Headlines & Economic Data:
- EU and UK reach Brexit deal but DUP refuses support
- Juncker says EU won’t back further extension
- Oil falls but losses limited by new Brexit deal
- China says it hopes to reach phased trade pact with U.S. as soon as possible
- China’s Foreign direct investment inflow rises 6.5% in January-September
- Philly Fed manufacturing index stumbles in October
- U.S. housing starts fall 9%, but high permits, low mortgage rates suggest construction slowdown is temporary
- U.S. Industrial production fell back 0.4% in September after advancing 0.8% in August
- ECB’s Lane says date of first rate hike depends on data
- ECB hawks demand revolution from new president Lagarde
- ECB will implement September package but review is welcome: Villeroy
- Australia unemployment rate dips to 5.2%, still long way to go
- Sizeable downturn’: RBA warns housing will weigh on economy for another year
- NAB Quarterly Business Confidence comes in at -2, conditions remain below average
- Swiss trade balance closed with a surplus of CHF 5.9 billion
Upcoming Potential Catalysts on the Forex Calendar:
- Fed’s Bowman & Evans give speeches at 7:00 pm GMT
- U.S. Monthly Budget Statement at 7:00 pm GMT
- RBA Governor Lowe speech at 9:00 pm GMT
- Fed’s Williams gives speech at 9:20 pm GMT
- Japan Inflation at 12:30 am GMT (Oct. 18)
- China GDP, Industrial production, Retail sales at 3:00 am GMT (Oct. 18)
- Euro area Current account at 9:00 am GMT (Oct. 18)
What to Watch: AUD/JPY
AUD/JPY bulls have been on fire since yesterday’s session on a combination of a surprise downtick in the Australian unemployment rate, as well as constructive developments in the Brexit and U.S.-China trade front lately. And the volatility may no fade from here as we’ll get economic updates from China, which would likely not only affect global risk sentiment depending on the latest reads, but Australian sentiment as well given their close trading relationship.
For the bulls, it might be a little too late not to jump in for short-term profits with the stochastic signaling over bought conditions, but if we see a pullback on profit taking today and/or some bearish geopolitical updates, then the very short consolidation area between 73.00 – 73.80 should be watched for bullish reversal patterns to potential setup a swing long position, especially if the Chinese data comes out better-than-expected. With a daily ATR of around 70 – 80 pips, this area potentially re-testable within the next session or two.
For the bears, it’s a tough argument to make for a short position, other than a very short-term play at current levels if you think the rally is overdone and profit taking is just ahead. But if the geopolitical drivers reverse to bearish, which is possible given the rollercoaster ride in headlines over the past year or so, then that combined with likely profit taking strengthens the case for a very short-term short position. Again, with a daily ATR of around 70 – 80 pips, this week’s lows around 73.00 is viable target and pretty good short-term potential return-on-risk (R:R).