Checking out AUD/JPY once again as the bears remain strong in the current risk-off environment, and ahead of more economic updates from Australia, China and Japan.
Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on GBP/JPY ahead of the BOE statement, 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: 13210.01 -1.01% FTSE: 7388.21 -1.27% S&P 500: 3257.48 -0.49% DJIA: 28644.10 -0.31% |
US 10-yr 1.565% -0.029 Bund 10-YR -0.397% -0.025 UK 10-YR: 0.547% +0.029 JPN 10-YR: -0.054% -0.026 |
Oil: 52.42 -1.71% Gold: 1582.00 +0.38% Bitcoin: 9345.21 +1.34% Etherium: 175.79 +2.51% |
Fresh Market Headlines & Economic Data:
- Russia closes China border as outbreak tops 7,900 cases with 170 deaths
- Oil falls 2% on spread of China virus
- Bank of England opts against a rate cut but warns of slow growth after Brexit
- Fourth-quarter U.S. GDP rose only 2.1% and full-year 2019 posts slowest growth in three years at 2.3%
- U.S. unemployment rate remained at the 50-year low level of 3.5%
- German employment up 0.6% on the same month a year earlier
- Euro area unemployment at 7.4%; EU28 at 6.2%
- UK car production hits lowest level since 2010 on Brexit and diesel woes
Upcoming Potential Catalysts on the Forex Calendar for U.S. & Asia:
- Japan Unemployment Rate & CPI at 11:30 pm GMT
- Japan Retail sales & Industrial production at 11:50 pm GMT
- U.K. Gfk Consumer confidence at 12:01 am GMT (Jan. 31)
- Australia PPI & Private sector credit at 12:30 am GMT (Jan. 31)
- China Manufacturing & Services PMIs at 1:00 am GMT (Jan. 31)
- Japan Housing starts & Construction orders at 5:00 am GMT (Jan. 31)
What to Watch: AUD/JPY
Given the continued driving theme of fear across the financial markets due to the growing concerns of the Coronavirus, it makes sense to revisit AUD/JPY this week as it is the best currency pair to play. With the Aussie thought of as a trading proxy for China and the yen a usual beneficiary to risk aversion environments, it’s probably a better than even probability that the downtrend in AUD/JPY continues.
While the trend in the pair is a strong one, we do have to take note that we’ve got potential catalysts for AUD/JPY coming soon from Australia, China and Japan, as seen in the “Upcoming Potential Catalysts” section above. None of the above are major sentiment game changers for either currency without a major surprise, but it’s likely volatility will stay bid for the pair.
This may create opportunities to play the current trend lower at better prices if we see a pop higher on a positive Australian/China vs. negative Japanese economic updates, at which point you’ll want to wait for a retests of the broken support area around 73.30 for bearish reversal patterns. Of course, if you’re already expecting more bad data from Australia and China–or more negative Coronavirus news–then scaling into a short position from current levels up to that broken support area is a more aggressive entry strategy to consider.
For the bulls, there’s very little opportunity at the moment other than the argument of profit taking from the bears as this pair has nearly fallen a full weekly ATR (around 130 – 140 pips) from the week’s open at 74.17, but it’ll also likely take bullish Australian / Chinese data and a positive turn in the Coronavirus story before considering a long position makes sense. If that low probability scenario plays out, then a break above the falling ‘highs’ is the signal to start putting together a short-term long position plan.