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:
- Wall Street falls on fears of new infection wave
- Saudi Arabia says it will cut oil production by an additional 1 million barrels per day
- Minneapolis Fed president says ‘slow, more gradual’ recovery is more likely
- Italian industrial production fell by 28.4% m/m in March 2020
- ECB Heads for more stimulus even as courts spar over limits
- Boris Johnson’s 50-page plan for lifting lockdown revealed
- Swiss National Bank battling enormous pressure on safe-haven franc: Jordan
- Commonwealth Bank chief executive Matt Comyn sees nascent signs of post-pandemic recovery
- New Zealand business confidence rose to -46% in a preliminary May read vs. -66.6% in April
- Ardern thanks ‘team of 5 million’ as New Zealand reopens schools and offices
- Pandemic stirs BOJ debate of Great Depression-like downturn
- Japan looks to lift emergency declaration in most regions
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
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.