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It looks like AUD/JPY traders are taking a breather after a quick run higher, but volatility make pick again soon with catalysts ahead from the RBA and Japan.

Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on EUR/NZD ahead of comments from ECB President Lagarde, 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: 13564.32 +0.64%
FTSE: 7503.10 +0.28%
S&P 500: 3341.63 +0.21%
DJIA: 29303.49 +0.04%
US 10-yr 1.663% +0.014
Bund 10-YR -0.355% +0.015
UK 10-YR: 0.604% -0.012
JPN 10-YR: -0.015% -0.012
Oil: 50.60 -0.30%
Gold: 1568.80 +0.38%
Bitcoin: 9809.29 +2.42%
Etherium: 212.60 +5.00%

Fresh Market Headlines & Economic Data:

Upcoming Potential Catalysts on the Forex Calendar for U.S. & Asia:

  • RBA Governor Lowe speech at 10:30 pm GMT
  • Japan Average earnings & Household spending at 11:30 pm GMT
  • Fed Quarles speech at 12:15 am GMT (Feb. 7)
  • RBA Monetary Policy Statement at 12:30 am GMT (Feb. 7)
  • China Trade balance at 3:00 am GMT (Feb. 7)
  • Japan Leading Economic Index at 5:00 GMT (Feb. 7)

What to Watch: AUD/JPY

AUD/JPY 1-Hour Forex Chart
AUD/JPY 1-Hour Forex Chart

AUD/JPY hits the top of the watchlist today with potential catalysts from the Reserve Bank of Australia (RBA monetary policy statements and comments from RBA Gov. Lowe), as well as earnings and spending data from Japan. These have a low probability of being big time market movers, unless we get a surprise from the RBA. If the RBA gives us something new to shift rate cut expectations (which vary at the moment between an April cut to no cuts at all in 2020), then Aussie traders will surely pick a direction and run with it short-term. Of course, the Coronavirus story and Chinese stimulus has been the dominating global market driver over the past week, so any fresh developments there, especially in terms of a new vaccine, will likely get the Aussie and yen jumping.

From a price action standpoint, AUD/JPY is currently consolidating around the Fibonacci retracement area of the recent swing move lower from 76.24 – 72.41. This setups an opportunity for both news traders (straddle play setup ahead of the RBA / Japanese data later?) and swing traders (medium term trend lower, short on pullback).

If you’re a bear on AUD/JPY, look out for dovish commentary from the RBA today and possibly worsening Coronavirus news for a potential short term sell catalyst. In that scenario, a downside break of the consolidation marked above (roughly 74.00 – 74.30) may likely draw in sellers, both short-term and swing players to hop in the longer-term trend lower.

If you’re a bull on AUD/JPY, anything suggesting no rate cuts from the RBA this year will likely lift the Aussie, and when coupled with good news from China (either Coronavirus or Chinese stimulus related), a break above the consolidation will likely draw in short term-buyers. But with the longer-term tend currently point down, swing buyers may not participate unless we see a break/retest/hold pattern form around the 74.50 area.