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We’ve got a simple setup on today’s watchlist in AUD/JPY, which has channeling lower over the past week.

Will the upcoming PMI data from Australia and Japan boost volatility and keep the trend going?

Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on CAD/JPY to play oil’s volatility, so be sure to check that out to see if there is still a potential play!

Equity Markets Bond Yields Commodities & Crypto
DAX: 10378.41 +1.25%
FTSE: 5753.13 +1.99%
S&P 500: 2790.06 +1.96%
DJIA: 23429.82 +1.79%
US 10-yr 0.603% +0.035
Bund 10-YR -0.43% +0.052
UK 10-YR: 0.313% +0.016
JPN 10-YR: -0.005 -0.017
Oil: 14.39 +24.37%
Gold: 1731.70 +2.60%
Bitcoin: 7102.29 +3.04%
Etherium: 181.88 5.63%

Fresh Market Headlines & Economic Data:

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

  • Australia CommBank Manufacturing & Services PMI at 11:00 pm GMT
  • Japan Jibun Bank Manufacturing & Services PMI at 12:30 am GMT (Apr. 23)
  • Japan Leading index at 5:00 am GMT (Apr. 23)

What to Watch: AUD/JPY

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

On the one hour chart above of AUD/JPY, we can see a solid set of technical arguments for the pair to continue its trend lower. First, the pair has displayed both lower ‘highs’ and ‘lows’ over the past week to form a descending channel.

And today, we’re seeing the top of the channel being retested as stochastic signals potentially overbought short-term conditions. The pair also seems to have found resistance at the 61% Fib retracement area of the latest swing move lower from 68.90 – 67.30.

Fundamentally, we just went through a round of global risk aversion sparked by the massive price drop in oil at the start of the week. Today, both risk sentiment and oil has rebounded to lift AUD/JPY higher, but as mentioned above, we’re already seeing resistance.

With no catalysts scheduled for the rest of the U.S. session, technicals may be a bigger influence, so the bears may take the pair back.

But before jumping in a short position if you’re looking to play the technical setup, keep in mind that we will be seeing leading economic indicators from both Australia and Japan during the upcoming Asia session. They’re both likely to show weak business conditions and outlook, but if there is a surprise, especially a positive one, sentiment in AUD/JPY could shift short-term.

With potential catalysts ahead, it’s a good idea to keep your risk smaller than usual. So for the AUD/JPY bears out there, consider scaling into a short position from current levels up to the falling top trendline, then if the trade goes your way off of support data, think about ramping up your position further. 

If you’re a bull on AUD/JPY and the upcoming AU and JP data comes out in favor of your bias, ideally with a shift to positive in global risk sentiment, watch out for a break above the channel before considering a long position.