Checking out this simple technical pattern on AUD/JPY to play today’s sour market mood and potential catalysts ahead for the Aussie dollar.
Intermarket Snapshot
| Equity Markets | Bond Yields | Commodities & Crypto |
| DAX: 13164.34 -0.58% FTSE: 7304.02 +0.01% S&P 500: 3113.85 -0.21% DJIA: 27989.48 -0.06% |
US 10-yr 1.795% -0.039 Bund 10-YR -0.346% -0.014 UK 10-YR: 0.729% -0.001 JPN 10-YR: -0.088% -0.021 |
Oil: 57.20 -0.90% Gold: 1471.10 +0.18% Bitcoin: 8414.00 -0.66% Etherium: 181.05 -1.23% |
Fresh Market Headlines & Economic Data:
- Mood in Beijing about trade deal is pessimistic, government source says
- Oil prices fall below $63 on trade talks uncertainty
- China tells U.S. and Britain to stop interfering in Hong Kong affairs
- Homebuilder confidence slips slightly in November
- China Jan-Oct FDI up 6.6% y/y in yuan terms
- Trump hails ‘cash’ subsidies to farmers and U.S. aid in China trade war
- The price of U.K.property coming to market falls by 1.3% (-£3,904) this month
- UK’s Johnson drops corporate tax cut plan in bid to woo voters
- Bundesbank sees German economy stagnating in fourth quarter
- ECB has not reached limits of monetary policy: Lane
- Low ECB rates will further weigh on bank profits: de Guindos
- The BusinessNZ Performance of Services Index in New Zealand rose to 55.4 in Oct. 2019 from an upwardly revised 54.5 previous
Upcoming Potential Catalysts on the Forex Calendar for U.S. & Asia:
- Fed Mester speech at 5:00 pm GMT
- U.S. Net Long-term Tic flows at 9:00 pm GMT
- RBA Kent speech at 10:00 pm GMT
- RBA Meeting minutes & Westpac Leading Index at 12:30 am GMT (Nov. 19)
- Euro Area Construction Output at 10:00 am GMT (Nov. 19)
- Canada Manufacturing Sales at 1:30 pm GMT (Nov. 19)
- U.S. Housing starts & building permits at 1:30 pm GMT (Nov. 19)
What to Watch: AUD/JPY
Traders seem to be in risk aversion mode to start the week off of negative developments in the U.S.-China trade story. With uncertainty on whether or not we’ll see tariff rollbacks on China, odds have risen that the trade deal may not go forward. This has sent equities, bond yields and oil lower on the session, and seems to be supporting the safe haven currencies like the Japanese yen.
We think playing along with this theme makes sense, and while there aren’t high probability market movers coming in the next session, the upcoming RBA meeting minutes / Australian consumer sentiment could bring in some volatility, making AUD/JPY a great place to look for opportunities.
And we may have found that opportunity in the Fibonacci pullback on the one hour chart, a technical setup that works well if the market continues with the broad risk aversion sentiment. The pair has already reversed back into the recent downtrend after finding resistance at the 38%, but if the upcoming data / news shakes up the market to bounce, opportunities may still be there if the 38% – 50% Fib area is retested. With a daily ATR of roughly 60 – 65 pips, the potential R:R for a short-term trade is an attractive one, event at current levels.
For the bulls, it’s a tough argument to make at the moment, but if the U.S.-China trade story flips once again, AUD/JPY is still a great pair to play, and a break above the 50% could be the cue that draws in short-term bulls who think the November highs around 75.50 is a reachable target on geopolitical catalysts.