Daily U.S. Session Watchlist: AUD/JPY

AUD/JPY hits the top of the watchlist today as the pair rallies higher on positive risk sentiment. But we’ve got resistance ahead and potential catalysts from Australia, China and Japan. Will the resistance area be retested and broken, or will the bears take control once again?

Intermarket Snapshot

Fresh Market Headlines & Economic Data:

Dow futures rise more than 200 points as Pfizer, BioNTech vaccines get ‘fast track’ status

Pfizer, BioNTech’s coronavirus vaccines get FDA’s ‘fast track’ status

Oil Drops on Signs OPEC+ Preparing to Taper Production Cutbacks

Canada June industrial prices rise on higher energy prices: Statscan flash estimate

China’s economy recovering but hard battle ahead: premier

Sweden joins France, Germany in weighing measures against China over Hong Kong

German Wholesale prices in June 2020: -3.3% on June 2019

France Primes Fresh Stimulus to Boost Jobs, Cut Taxes on Firms

UK trade fair industry warns 30,000 jobs at risk as events yet to resume

New Zealand food prices were up a seasonally adjusted 0.4% on month in June

Japan Indices of Tertiary Industry Activity: -2.1% m/m in May

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

Bank of England Governor Bailey speech at 3:30 pm GMT
Fed Williams speech at 3:30 pm GMT
Fed Kaplan speech at 5:00 pm GMT
U.S. Budget statement at 6:00 pm GMT
New Zealand Visitor Arrivals at 10:45 pm GMT
Australia Business confidence at 1:30 am GMT (July 14)
China Trade Balance at 3:00 am GMT (July 14)
Japan Industrial production at 12:30 am GMT (July 14)

What to Watch: AUD/JPY

AUD/JPY 1-Hour Forex Chart

AUD/JPY is on a heck of a run higher to open the new week, currently 68 pips up from the open, nearly a full daily ATR of around 80 pips. Given the length of the rally and some technical arguments for resistance ahead (oversold Stochastic, strong previous resistance area around major psychological level), will the rally end soon? 

Well, the current rally is mostly based on risk sentiment, which has been propped up by positive coronavirus related headlines (e.g., Pfizer, BioNTech’s coronavirus vaccines get FDA’s ‘fast track’ status) and ignoring the accelerated rate of new COVID-19 cases (e.g., Florida Reports 15,300 New Virus Cases, a Record for U.S. States). That’s not likely to change at the moment, but we do have some economic data ahead that may serve as a catalyst to add to / slow down the rally.

As seen above in the “Upcoming Potential Catalysts” section, Australia, China and Japan are releasing updates, which are mostly mid-tier reports. If we do get a massive surprise, then we could see an influence on the current trend.

For now, the 75.00 major psychological handle is the level to watch, and if we see an upside break on positive news from Australia and China, look out for that level to turn into support before considering a long position for a short-term / swing trade. We should also watch the 74.00 – 74.50 area as well. If retested ahead of the news, bullish reversal patterns there may draw in technical traders to play the medium-term trend higher.

For the bears, a shift in global risks sentiment, bad AU & CN data, and bearish reversal patterns is the scenario to watch before considering a short position in AUD/JPY. If so, traders may target the next major psychological level of 74.00, which is reachable within a session or two given the daily ATR.