With economic events up ahead from Australia, China and Japan ahead, will the consolidation on AUD/JPY finally turn into a breakout?
Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on EUR/USD ahead of German & U.S. data, so be sure to check that out to see if there is still a potential play!
Intermarket Snapshot
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Fresh Market Headlines & Economic Data:
Dow futures drop 200 points amid record GDP decline, tech shares fall before big earnings
Second-quarter U.S. GDP plunged by worst-ever 32.9% amid virus-induced shutdown
U.S. weekly jobless claims rise for a second straight week, total 1.434 million
German GDP in the 2nd quarter of 2020 down 10.1% q/q
German Preliminary CPI read for July 2020 -0.1% m/m
German employment change in June 2020: -0.1% m/m, -1.3% y/y
UK worries about second COVID-19 wave in Europe, more quarantine steps possible
China pledges second-half policy support as faces complex economic situation
KOF Swiss economic barometer for July: 85.69 vs 60.65 in June
Upcoming Potential Catalysts on the Economic Calendar for U.S. & Asia:
Japan Unemployment rate at 11:30 pm GMT
Japan Industrial Production at 11:50 pm GMT
China Services PMI at 1:00 am GMT (July 31)
Australia PPI, Private Sector Credit at 1:30 am GMT (July 31)
Japan Consumer Confidence, Housing Starts at 5:00 am GMT (July 31)
What to Watch: AUD/JPY
It’s been a sleepy market for AUD/JPY over the past few sessions, prompting price action to form a consolidation pattern on the one hour chart above. But we could be in for a breakout as risk sentiment flips negative on the session, enough to start to push AUD/JPY below the bottom of the range.
For the bears out there, if we see negative Australia / China economic updates come out weaker-than-expected, not only culd that put pressure on the Aussie, but also add to negative global risk sentiment which would likely support the Japanese yen.
With a stop above the consolidation range and target around the a daily ATR of around 70 pips, you’ve got a decent short-term potential return-on-risk, as well as a potential swing trade setup. That consolidation break could draw in longer-term traders and create momentum lower if risk sentiment stays negative.
For the bulls, it’ll likely take a combination of both better-than-expected Australian / Chinese data and positive global risk sentiment to draw in buyers on the pair. If that scenario plays out, then watch out for a sustained break above the consolidation area before considering a long position.
Or if the pair is able to sustain above the 75.00 handle before the events, consider a long position at the market if we see positive data from that part of the world.