It’s a positive start to the new week, once again on hopes of a recovery as economies open and vaccine development progresses, making the upside break in AUD/JPY one to watch.
Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on EUR/JPY ahead of mid-tier reports from the eurozone, so be sure to check that out to see if there is still a potential play!
|Equity Markets||Bond Yields||Commodities & Crypto|
|DAX: 11516.92 +1.10%
FTSE: 6057.18 +1.07%
S&P 500: .014.92 +2.01%
DJIA: 25121.58 +2.68%
|US 10-yr 0.695% +0.036
Bund 10-YR -0.432% +0.057
UK 10-YR: 0.21% +0.36
JPN 10-YR: -0.003 -0.002
|Oil: 34.02 +2.32%
Gold: 1713.00 -1.29%
Bitcoin: 8815.21 -1.09%
Ethereum: 201.15 -1.60%
Fresh Market Headlines & Economic Data:
- U.S. Consumer confidence for May rises to 86.6, vs 82.3 expected
- US home price growth picked up in March despite COVID-19
- New U.S. home sales rise slightly in April despite coronavirus-related shutdowns
- ECB’s Villeroy: inflation target is symmetrical, flexible and mid-term
- German consumer morale improves slightly, job fears remain high: GfK
- ECB Says Euro Area Still on Shaky Ground as Economy Reopens
- Brexit talks ‘risk stalemate’ if no progress on key issues
- U.K. Retail sales remain depressed, but decline expected to ease
- BoE Not Remotely Close to Any Decision on Negative Rates: Haldane
- Novavax set to conduct human trials of coronavirus vaccine
- Oil prices climb on prediction of swift demand rebalance
Upcoming Potential Catalysts on the Economic Calendar for U.S. & Asia:
- Fed Kashkari speech at 5:00 pm GMT
- BOC Wilkins & Governor Poloz speech at 9:00 pm GMT
- RBNZ Financial Stability Report at 9:00 pm GMT
- Australia Construction Work done at 1:30 am GMT (May 27)
- China Industrial profits at 1:30 am GMT (May 27)
What to Watch: AUD/JPY
As mentioned in the intro, global risk sentiment is on the upswing during the U.S. session on recovery hopes and vaccine news. With this type of environment, selling some Japanese makes sense, and with Australian and Chinese economic catalysts ahead during the Asia session, checking out AUD/JPY seems to be the pair to watch.
From a price action point of view, AUD/JPY surged during the Asia session to break above the minor resistance area around the 71.00 major psychological handle. The momentum remains pretty strong, which could be drawing in more buyers if resistance turns into a support area.
But again, there are some catalysts ahead, so it’s probably a good idea to hold off on a new position now given the speed of the move. But if you are bullish and aggressive with your expectations of the pair going higher, then consider scaling into a long position, starting with a nibbler now and buying lower on any kind of pullback (a possibility as stochastic signals overbought conditions).
For those who want to wait for the data and are bullish on AUD/JPY, a pullback to retest the 71.00 and hold / bullish reversal patterns is the technical signal to start looking at a long position, especially if Australian/Chinese data surprises positive or better-than-expected. An entry in that area makes sense for a swing positions given the daily ATR of around 100 pips and the next support area around the 70.00 major psychological handle.
For the bears, you’ll likely need weak updates from Australia and China, PLUS a negative turn in global risk sentiment, before traders get bearish on AUD/JPY. If that scenario does occur, shorting at current levels up to 72.50 makes sense if bearish reversal patterns for and the bears hold.