Global risk sentiment continues to dominate FX behavior, and with top tier Australian economic data ahead, this simple pattern on AUD/JPY is one to watch!
Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on GBP/USD on pressure for the BOE to make moves, 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: 11921.27 -1.70% FTSE: 6688.63 -1.86% S&P 500: 3072.97 -1.83% DJIA: 26546.02 -2.01% |
US 10-yr 0.933% -0.059 Bund 10-YR -0.681% -0.047 UK 10-YR: 0.336% -0.034 JPN 10-YR: -0.106% +0.039 |
Oil: 46.77 -0.02% Gold: 1660.90 +1.09% Bitcoin: 9086.5 +3.14% Etherium: 231.39 +2.08% |
Fresh Market Headlines & Economic Data:
- U.S. factory orders decline 0.5% in January
- U.S. weekly jobless claims fall; labor market appears to weather coronavirus
- U.S. fourth-quarter unit labor costs, productivity revised down
- EU’s Barnier says ‘serious’ differences in UK talks but deal possible
- EU grants governments fiscal leeway to fight coronavirus impact, eyes more
- UK will give economy support it needs to get through coronavirus: PM Johnson
- More firms expect Brexit uncertainty to stretch into 2021: Bank of England
- China to step up funding support for virus-hit regions
Upcoming Potential Catalysts on the Forex Calendar for U.S. & Asia:
- Bank of England Governor Carney speech at 5:00 pm GMT
- Bank of Canada Governor Poloz speech at 5:45 pm GMT
- Australia Services Index at 9:30 pm GMT
- Japan Household spending & earnings at 11:30 pm GMT
- Fed Kaplan speech at 11:30 pm GMT
- Australia Retail sales at 12:30 am GMT (Mar. 5)
- Fed Kashkari speech at 1:00 am GMT (Mar. 5)
- Fed Williams speech at 1:45 am GMT (Mar. 5)
- Japan Leading economic index at 5:00 am GMT (Mar. 5)
What to Watch: AUD/JPY
Rising cases of Coronavirus infections and deaths has traders back in risk aversion mode once again, prompting another rally in the yen for the session and weakness in risk assets. Looking forward, we’ll get economic updates from Australia to potentially add to the volatility, making this simple pattern on AUD/JPY one to watch.
As we can see in the chart above, the pair slowly moved higher over the last three session, forming an ascending wedge in the process. That wedge was broken to the down side today thanks to the refocus back on Coronavirus cases after Wall Street’s positive session on Wednesday, which may draw in technical traders looking to play the negative global risk sentiment.
For the bears, you’ve got several entry strategies to consider, depending on your risk tolerance. For the more aggressive and those expecting further weak economic updates and/or negative Coronavirus updates, shorting at current market makes sense as a daily ATR of around 90 pips gives a rough 1:1 potential return-on-risk if targeting the Mar. 1 lows and using the area above the wedge high as a stop. For the more prudent trader, waiting for a retest of the rising ‘lows’ pattern makes sense if you think the intraday move is overdone, giving a much better potential return-on-risk and higher probability of success.
For the bulls, it may take a combination of positive Coronavirus news (e.g., sped up timeline of vaccine availability, slowing new cases around the world) and positive Aussie news to get bullish on the pair short-term. If that scenario plays out, look for a break-and-hold above the 71.50 minor psychological level before considering a swing long position.
