We’ve got the latest employment update coming soon from Australia, which makes this consolidation pattern on AUD/JPY for a potential breakout setup!
Before moving on, ICYMI, today’s Daily London Session Watchlist looked at both short and long-term opportunities forming on EUR/JPY, so be sure to check that out to see if there is still a potential play!
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What to Watch: AUD/JPY
Right around the corner, Aussie traders will get hit with the latest employment situation update from Australia. And if you haven’t done your homework on the event yet, be sure to check out Forex Gump’s work on this potential catalyst (Event Preview: Australia’s Jobs Report (October)) before crafting your trading plan.
With expectations of last months weak update repeating, the odds are for the Aussie to move lower around the event. If that scenario plays out, AUD/JPY presents a simple technical setup to structure a short-term play.
On the one hour chart above, we can see the pair has been consolidating over the last week, forming a pseudo descending triangle around a strong resistance area (76.00 – 78.00 has reversed the market several times through 2020). If the Aussie jobs data does disappoint and we didn’t get a pre-event sell off, then the reaction could be bearish.
In that scenario, watch for a break of the support area around 75.75 handle. If so, this could draw in momentum traders to potentially take the pair lower, especially if broad risk sentiment shifts negative (e.g., fresh headlines of more COVID restrictions, potential problems with vaccine/therapy, geopolitical issues, etc.).
If the AU jobs data surprises positive, that could bring in lots of buying as it reduced speculation biases of more RBA stimulus. And if broad risk sentiment is leaning positive, it may be enough for an upside break of the falling ‘highs’ pattern.
In that scenario, watch for momentum and/or a break-and-retest pattern before considering a long position and playing the recent trend higher.