Welcome to a brand new week of FX trading, and today we’re throwing up AUD/JPY on to the watchlist as a potential setup forms ahead of economic updates from both Australia and Japan.
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Fresh Market Headlines & Economic Data:
- The Federal Reserve just pledged asset purchases with no limit to support markets
- Brent crude extends fall as coronavirus shutdowns sap demand
- Canadian wholesale sales increased for a second consecutive month, up 1.8% to $65.2B in January.
- The Conference Board Leading Economic Index for China decreased 1.0% in February 2020 to 154.5
- Kashkari to Congress: Err on being generous
- Senate fails to advance coronavirus stimulus package
- German recession inevitable but public finances solid: Bundesbank
- ECB Ready to Do More for Coronavirus Emergency if Needed, Visco Tells Paper
- Australia Passes Massive Stimulus Measures as Virus Spreads
- Reserve Bank of New Zealand moves on QE – begins $30 billion bond buy up
- Global coronavirus cases cross 350,000, death toll passes 15,000 as pandemic takes hold
Upcoming Potential Catalysts on the Forex Calendar for U.S. & Asia:
- Euro area Consumer confidence at 3:00 pm GMT
- Australia Manufacturing & Services PMI at 10:00 pm GMT
- Japan Manufacturing & Services PMI at 12:30 am GMT (Mar. 24)
- Japan Leading Economic index at 5:00 am GMT (Mar. 24)
What to Watch: AUD/JPY
Looking ahead, we’ve got the latest PMI data coming from Australia and Japan during the Asia session. They’re not usually big market movers, but they could add something to AUD/JPY, which is already on the move as risk sentiment continues to be a big driver of asset prices. And today, we just saw the Federal Reserve confirm that they will buy assets with no limit to support the economy, prompting a spike lower in the yen momentarily. This is leading AUD/JPY to an area of strong interest on the one hour chart above (around 65.50), they may be an opportunity for both buyers and sellers to keep an eye on.
For the bears, the current longer-term trends are on your side so the scenario to watch out for is a retest of the 65.50 area, which happens to be previous broken-support-turned-resistance, as well as the 61% Fibonacci retracement area. Also, the technical case gets a little stronger if the stochastic indicator gets all the way be to overbought conditions. In this scenario, with a weak Australian PMI update relative to Japan’s data, traders may look to sell, especially if bearish reversal patterns form in the short-term.
For the bulls, the odds aren’t with ya on AUD/JPY until the market breaks above the 65.50 area and forms a support base. It’s likely we’ll need to see more stimulus from central banks/governments for traders to get bullish, but also be on the look out for positive coronavirus news (e.g., closer to a vaccine/slowdown in cases and/or death rates, etc.) before considering a long position. Remember that these are chaotic times and the story can change very quickly for the markets, so trade small and only the very best setups you can find.