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AUD/JPY makes it to the top of the watchlist as it breaks out of a consolidation pattern ahead of top tier data from Australia.

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

Intermarket Snapshot

Equity Markets Bond Yields Commodities & Crypto
DAX: 13089.46 +1.10%
FTSE: 6290.81 +2.21%
S&P 500: 3377.46 +1.31%
DJIA: 27951.11 +0.95%
US 10-YR: 0.686% +0.028
Bund 10-YR: -0.449% +0.025
UK 10-YR: 0.242% +0.04
JPN 10-YR: 0.039% +0.01
Oil: 42.56 +2.28%
Gold: 1954.60 +0.42%
Bitcoin: 11,615.71 +2.03%
Ethereum: 387.98 +1.64%

Fresh Market Headlines & Economic Data:

U.S. Mortgage applications rose 2% for the week; 22% higher than the same week one year ago.

U.S. commercial crude oil inventories (excluding those in the SPR)
decreased by 4.5M barrels w/w.

U.S. consumer price index rose 0.6% m/m in July

Mnuchin declines to say if U.S. COVID-19 aid deal can be reached

Fed’s Rosengren says slowdown in economic activity likely to continue

Industrial production up by 9.1% in both euro area and EU; down by 12.3% and 11.6% compared with June 2019

UK enters recession after GDP plunged by a record 20.4% in the second quarter

UK industrial production output rose by 9.3% m/m in June 2020; manufacturing output rose by 11.0% m/m

UK Business investment fell by 0.3% in Q1 2020

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

U.S. Monthly Budget Statement at 6:00 pm GMT
Fed Daly speech at 7:00 pm GMT
Japan PPI at 11:50 pm GMT
Australia New Home Sales at 12:00 am GMT (Aug. 13)
Australia Consumer Inflation expectations at 1:00 am GMT (Aug. 13)
Australia Employment at 1:30 am GMT (Aug. 13)

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 that the currency pair has been trading sideways for the past week, taking a break from the longer-term uptrend that started back at the heights of pandemic fears back in March.

But today, we see the pair breaking above the minor resistance area just under 76.50, which could draw in technical traders and get some momentum going.

We may also see momentum sparked by event risk later in the Asia session as we’ll get economic updates from Australia, most notably the monthly employment update. The forecast is for the employment data to worsen in July vs. June, so any surprise there will be the likely main catalyst for short-term moves in the Aussie.

For the bulls, the scenario to watch out for is a better-than-expected employment update from Australia, and ideally, improvements with their housing and inflation data as well on top of weaker-than-expected Japanese PPI numbers.

Bullish patterns at the broken resistance are the behavior to watch out for in that situation, but if we see a retest of the rising lows pattern marked on the chart above before the data is out, then look out for bullish patterns there.

For the bears, inline or weaker-than-expected results for Australian data could draw in the sellers, especially those watching the top of the small range for bearish reversal patterns. Shorting there provides a rough 1:1 return-on-risk if using the daily ATR (around 70 pips) as a stop guide and bottom of the range as a target.

For those looking for a potential longer-term setup, waiting for a breakdown of the rising lows pattern may be the setup for you to get into a swing trade, especially if broad risk sentiment flips negative.