Top tier scheduled events ahead from both Japan and Australia makes the consolidation pattern on AUD/JPY one to check out for a potential breakout.
Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on NZD/USD for a potential retracement setup, so be sure to check that out to see if there is still a potential play!
Intermarket Snapshot
| Equity Markets | Bond Yields | Commodities & Crypto |
| DAX: 13294.76 +0.68% FTSE: 7473.57 +0.83% S&P 500: 3271.61 +0.86% DJIA: 28707.59 +0.60% |
US 10-yr 1.636% +0.031 Bund 10-YR -0.379% +0.005 UK 10-YR: 0.546% +0.037 JPN 10-YR: -0.034% +0.003 |
Oil: 53.35 +0.40% Gold: 1571.70 -0.36% Bitcoin: 9015.71 +1.05% Etherium: 172.04 +0.66% |
Fresh Market Headlines & Economic Data:
- Oil turns positive after five-day rout as OPEC might act
- Coronavirus has killed 106 and infected 4,515 people, Chinese health authorities say
- The Conference Board’s U.S. consumer confidence index rose to 131.6 this month from 126.5 in December.
- Nationally, U.S. house prices increased 3.5% annually in November, up from 3.2% in October, according to the S&P CoreLogic Case-Shiller National Home Price Index.
- US core capital goods orders post biggest drop in 8 months
- Spain’s jobless rate falls in fourth quarter to lowest level in 11 years
- U.K. Retail sales volumes were flat for the third consecutive month
- Switzerland posted its highest ever trade surplus in 2019 to 37.3 billion Swiss francs ($38.55 billion)
Upcoming Potential Catalysts on the Forex Calendar for U.S. & Asia:
- API Crude oil stock change at 9:30 pm GMT
- Bank of Japan Summary of Opinions at 11:50 pm GMT
- Australia Inflation at 12:30 am GMT (Jan. 29)
- Japan Consumer confidence at 5:00 am GMT (Jan. 29)
What to Watch: AUD/JPY
Risk aversion sentiment has calmed down in the past session from the early week intensity sparked by the Coronavirus outbreak. That’s very true for AUD/JPY as it has settled into somewhat of a range since the beginning of Monday’s U.S. session, but will the consolidation last? Probably not given that we have top tier data from Australia on the way and potential catalysts from Japan as well. Plus, we’ll likely continue to see a stream of Coronavirus updates, and any acceleration of spreading would likely bring in more volatility for AUD/JPY.
So for today, we’re checking out AUD/JPY for a potential consolidation break on any surprise updates from Australia or Japan. A long position for quick pips on an upside breakout is a valid position to take if Australian CPI comes in better-than-expected (likely lowering speculation of RBA rate cuts), and/or Japanese consumer confidence surprises weaker-than expected. Any positive updates to the Coronavirus story (e.g., slowdown in new confirmed cases) would also likely have a positive effect on AUD/JPY. If the market does move higher, the next resistance area (marked on the chart above) would likely come around the weekend gap open around 74.35, which means you’ll have to keep a tight stop to make for a decent potential return-on-risk.
If we see the opposite scenario (i.e., weak Australian CPI, positive Japanese consumer confidence) and/or the Coronavirus situation worsens, a downside break will likely draw in sellers to play the recent momentum lower, and with no major support seen until the next swing lows last seen around October 2019 (around 72.00), the odds are pretty good for a strong potential return-on-risk if using the daily ATR of 60 pips as a stop guide.