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Price action is on the moving in the morning U.S. session, thanks to fresh data and comments from Fed Chair Powell.  The brought the bears back into AUD/JPY, continuing its renewed trend lower. Will the upcoming Aussie and Japanese data keep the momentum going?

Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on GBP/JPY ahead of UK jobs data, so be sure to check that out to see if there is still a potential play!

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Fresh Market Headlines & Economic Data:

Powell says the Fed doesn’t want to ‘run through the bond market like an elephant’

U.S. May retail sales surge 17.7% in the biggest monthly jump ever

U.S. industrial production bounces back 1.4% in May

U.S. Homebuilder sentiment posts biggest monthly surge ever, a sign housing is rebounding from coronavirus

Employment falls 600,000 since lockdown as UK faces ‘biggest jobs crisis in at least 25 years

Investors confident of German economic upturn by September – ZEW

Foreign investment in Canadian securities reached a record-high of $49.0 billion in April, all in debt securities.

IEA: Oil demand set for record bounce next year

Swiss economy expected to shrink by worst rate in decades

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

API Crude Oil Inventory Change at 8:30 pm GMT
Clarida speech at 10:30 pm GMT
Japan Reuters Tankan Index at 11:00 pm GMT
Japan Trade Balance at 11:50 pm GMT
Australia New Home sales at 12:00 am GMT (June 17)
Australia Leading Index at 1:30 am GMT (June 17)

What to Watch: AUD/JPY

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

On the one hour chart of AUD/JPY, we can see a pattern of lower ‘highs’ forming, with the bears winning out once again on a retest of the 75.00 handle. And this morning, the bears picked up their selling pressure, correlating with risk-off sentiment during the U.S. session after Federal Reserve Chairman Jerome Powell presented the Semiannual Monetary Policy Report before the Senate Banking Committee, indicating they will not likely be aggressive with their new corporate bond buying plans.

With risk sentiment swing back towards negative, and a economic catalysts ahead from both Australia and Japan, AUD/JPY is likely to see its volatility stay elevated in the short-term, which means short-term opportunities may lay ahead.

For the bears on this pair, continued risk aversion sentiment (i.e., possibly on a continued bearish reaction to Powell statement, more negative coronavirus updates) and negative Aussie updates will play in your favor. But with the market trading in between the strong levels of interest, it’s probably best to wait for a rebound or downside break.

On a rebound, watch out for bearish reversal signals around the falling ‘highs’ pattern, around 74.50 – 75.00 before considering a short positions. On a downside break, a hold below 73.00 will likely draw in more sellers, especially if risk sentiment continues to be more negative.

For the bulls, let’s see if the markets can shake off Powell’s comments this morning. If so, and we see positive Aussie data / negative Japanese data, AUD/JPY could draw in buyers at that strong support area around 73.00, especially if stochastic is signaling oversold conditions.

A break above the falling ‘highs’ pattern is also a valid buy signal to watch out for, but use as a swing signal rather than a short-term trading signal given the low potential return-on-risk if using the daily ATR of around 130 as your exit guides.