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Taking a look at AUD/JPY to start the new week as the pair continues its rally higher from last week’s consolidation break. Will the upcoming RBA interest rate decision bring in more traders to push the pair higher?

Intermarket Snapshot

Equity Markets Bond Yields Commodities & Crypto
DAX: 12707.26 +1.43%
FTSE: 6264.2 +1.74%
S&P 500: 3171.88 +1.34%
DJIA: 26139.31 +1.21%
US 10-yr 0.694%  +0.0023
Bund 10-YR -0.428% +0.004
UK 10-YR: 0.205% +0.017
JPN 10-YR: 0.046% +0.002
Oil: 40.48 -0.42%
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Ethereum: 235.58 +3.62%

Fresh Market Headlines & Economic Data:

Dow jumps 300 points to start the week as Wall Street shakes off a rise in virus cases

ISM Non-manufacturing Index at 57.1 in June vs. 45.4 in May

U.S. Business activity contraction slows in June as new business nears stabilization

German factory new orders up 10.4% m/m (seasonally adjusted)

Euro zone investor morale up in July but recovery could stall: Sentix

Eurozone productivity decline moderates in June

In May 2020, volume of retail trade up by 17.8% in euro area
Up by 16.4% in EU

EU current account surplus €59.9 bn; €3.1 bn deficit for trade in services

Strong rebound in UK construction output as reopening gathers pace during June

Oil mixed on tighter supply, surge in U.S. virus cases

Trump weighs executive orders on China, manufacturing, immigration, aide says

EU will stand firm against Washington over trade disputes, says commissioner

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

Australia Services Index at 10:30 pm GMT
Japan Household spending & Average cash earnings at 11:30 pm GMT
U.S. Vehicle sales at 12:00 am GMT (July 7)
RBA Interest Rate Decision at 4:30 am GMT (July 7)
Japan Leading Economic Index at 5:00 am GMT (July 7)

What to Watch: AUD/JPY

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

On the hourly chart above, we can see that AUD/JPY bulls have been in control over the past week, forming a pattern of rising ‘lows’ but encountering minor resistance around the 74.75 handle.

Well, that resistance was broken in today’s session, likely with the help of broad risk-on sentiment that’s driving the markets today, and already tested on a pullback where traders had buy orders waiting.

Looking forward, we have potential volatility coming for AUD/JPY with a slew of economic updates from Australia and Japan, but more notable is the latest interest rate decision from the Reserve Bank of Australia. Will this event be a market mover?

Expectations are for no changes from the RBA at this upcoming decision, so it’s likely the uptrend still has legs if there are no surprises later and if broad risk sentiment remains positive. That means the bulls still have an edge in this scenario and if it plays out this way, potential short-term long positions are ideal on a retest of the rising ‘lows’ pattern with another support pattern forming.

For the more aggressive traders, scaling into a long position from current levels down to the rising trendline is also a viable entry strategy if there are fears of missing out on an extended up move.

For the bears, looking out for surprise dovish rhetoric as a potential selling catalyst in AUD/JPY, especially if global risk sentiment turns negative and/or Japanese data surprises positive. In this scenario, a break below the rising ‘lows’ pattern will likely draw in momentum/technical sellers, so what out for that reaction.

We could also see potential resistance forming around 75.00 – 75.50, which is not only a major psychological area, but he top of the daily ATR range, which could draw in mean reversion style traders.