Broad risk sentiment is on the upswing towards positive for the session, and with potential catalysts coming from both Australia and Japan, this short-term uptrend in AUD/JPY is definitely one to watch.
Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on EUR/AUD ahead of the latest European PMI updates, so be sure to check that out to see if there is still a potential play!
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Fresh Market Headlines & Economic Data:
Upcoming Potential Catalysts on the Economic Calendar
Japan Unemployment rate at 11:30 pm GMT
U.S. Total Vehicle sales at 12:00 am GMT (Oct. 2)
Australia Retail sales at 1:30 am GMT (Oct. 2)
Japan Consumer confidence at 5:00 am GMT (Oct. 2)
What to Watch: AUD/JPY
On the one-hour chart above of AUD/JPY, we can see a pretty strong uptrend in AUD/JPY since bottoming out around the 74.00 handle at the end of September.
Broad risk sentiment is leaning positive due to hopes of another round of stimulus from the U.S. and positive business sentiment updates, so it’s likely we’ll see more risk-on vibes as long as U.S. Congress doesn’t disappoint.
If that’s the case, AUD/JPY strength may continue, and if we see better-than-expected data from the upcoming Australian Retail sales data, and even positive economic updates from Japan, then AUD/JPY could make its way to retest the broken minor support area around 76.20 – 76.50.
For the more conservative, a short-term reversal may be in the cards, given the run up on the session and the bearish divergence signal, so waiting for a pullback before going long makes sense if you’re bullish on the risk environment and upcoming data.
For the bears, that bearish divergence signal on AUD/JPY could draw in technical traders, and if Aussie retail sales data disappoints, or we get disappointing news on stimulus/COVID-19 related news, then this could be a swing reversal point for the pair on the higher timeframes.