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New week, new setups! And today we’re watching AUD/JPY as the pair retests a major area of interest ahead of potential catalysts from China, Australia and Japan.

Will we see more negative economic updates and will sellers jump in on today’s risk-off sentiment?

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Fresh Market Headlines & Economic Data:

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

    • U.S. Consumer inflation expectations at 3:00 pm GMT
    • Fed Bostic speech at 4:00 pm GMT
    • Fed Evans speech at 4:30 pm GMT
    • Australia Business confidence, Home loans at 1:30 am GMT (May 12)
    • China Inflation rate at 1:30 am GMT (May 12)
    • Japan Leading Economic index at 5:00 am GMT

What to Watch: AUD/JPY

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

Risk sentiment is swinging negative to start off the new week as fears arise that the move to reopen the global economy will set off a new wave of infections. This is likely to hold through the next session, making the Japanese yen a bit more attractive given its perceived ‘safe haven’ status. 

Combined with the upcoming economic updates from China, Australia and Japan, this makes AUD/JPY one to watch for potential directional moves and a pickup in volatility.

The pair is also interesting for a potential trade as well from a price standpoint as the market retests a major area of interest (Resistance at the 70.00 major psychological level) that brought sellers back in at the end of April.

If you’re a bear on AUD/JPY, then consider shorting AUD/JPY if the resistance around 70.00 holds after a round of negative updates from Australia and Japan. With a daily ATR of around 100 pips, the potential return-on-risk when targeting last week’s lows is a strong 2:1, pretty good for a short-term trade.

If you’re a bull on AUD/JPY, then an upside break above 70.00 on strong Australia / China updates should draw your attention for a potential long position. It’s probably best to wait for a “break/retest/hold” scenario around 70.00 before going long, but with a scale-in entry strategy, you can be flexible on where you get in.

Keep in mind that this does go against today’s broad risk sentiment, so it’s also probably a good idea to wait for a shift there before considering a long position.