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Lots of data ahead could mean a pick up in volatility for currencies, and at the top of our watchlist is AUD/JPY with multiple catalysts to watch from Australia, Japan & China. 

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Fresh Market Headlines & Economic Data:

Fed’s Clarida says rates won’t rise just because unemployment falls

Fed’s Clarida says new inflation-fighting strategy has roots in failure of old approach

Dallas Fed Manufacturing production index slightly lower to 13.1 in August 

Recovery in Canadian Consumer Confidence Shows Signs of Cooling

The total value of Canadian building permits fell 3.0% to $7.8B in July

Prices for products manufactured in Canada, as measured by the Industrial Product Price Index (IPPI), rose 0.7% in July

German Consumer price index for August 2020: -0.1% m/m, 0.0% y/y

Spanish Flash CPI for August stands at -0.5%

Portugal’s exports slump 40% in second quarter, stoke record GDP fall

ECB policy calibrated to deal with pandemic resurgence, says Schnabel

UK ready to walk away from Brexit trade talks over state aid demands

Swiss retail trade turnover rose in July 2020 by 3.4%

Australia Q2 inventories, wages decline amid first recession in 30 years

Australia Private Sector Credit in July: -0.1% m/m vs. -0.2% m/m in June.

Japan July retail sales fall 2.8% year-on-year, government data shows

Japan’s consumer confidence index slips in August

Upcoming Potential Catalysts on the Economic Calendar

Australia Manufacturing PMI at 11:00 pm GMT
Japan Unemployment Rate at 11:30 pm GMT
Japan Capital spending at 11:50 pm GMT
Japan Manufacturing PMI at 12:30 am GMT (Sept. 1)
Australia Building Permits, Current account at 1:30 am GMT (Sept. 1)
China Manufacturing PMI at 1:45 am GMT (Sept. 1)
Reserve Bank of Australia Interest Rate decision at 4:30 am GMT (Sept. 1)
Euro Area Manufacturing PMI at 8:00 am GMT (Sept. 1)
UK Manufacturing PMI at 8:30 am GMT (Sept. 1)
UK Consumer Credit & Mortgage approvals at 8:30 am GMT (Sept. 1)
Euro Area Inflation Rate, Unemployment rate at 9:00 am GMT (Sept. 1)

What to Watch: AUD/JPY

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

On the one-hour chart above of AUD/JPY, we can see the pair has been in a clear trend higher over the past week, benefiting from positive risk sentiment and negative updates from Japan.

So the price action is in favor of the bulls at the moment, but that all can shake up with several economic updates from not only Australia and Japan, but China as well.

Most notable from the group above is the latest interest rate decision from the Reserve Bank of Australia. Expectations are for no policy changes from the RBA this time, but any surprises there could spark a big move in the Australian dollar.

The manufacturing PMI updates from the various countries are important to watch as well, but unless we get a really big deviation from expectations, don’t expect much of a reaction with the RBA statement coming after their releases.

So for the bulls, the trend is you friend, but with a spike lower in the last hour, it’s probably a good idea to wait for a retest of the rising ‘lows’ pattern before considering a long position if you expect positive PMI data / optimistic commentary from the RBA.

For the more aggressive traders out there who may fear missing an upside move, considering scaling into a long position down to the rising ‘lows’ pattern to get something working before the catalysts ahead.

For the bears, it’s likely we’ll need to see really bad PMI data and shift in broad risk sentiment towards negative before traders turn bearish on the pair.

The real kicker would actually be a surprise stimulative move from the RBA, given recent statements from the RBA ( RBA Governor Lowe says AUD exchange rate needs to be lower, but intervention would not be successfulRBA Meeting Minutes: No need for further easing; downturn not as severe as expected)

But if those scenarios do play out, a break below the rising ‘lows’ pattern would likely draw in more sellers in this case, so it’s probably a good idea to set an alert below that pattern and re-examine the environment for a short position if triggered.