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We’ve got a potential short-term catalyst ahead for the Aussie, and with the markets likely to keep its risk-on lean, we’re checking out this upside resistance break in AUD/JPY for potential short-term pips!

Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on the ranging pattern in GBP/AUD, 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:

Dow rises more than 100 points as Boeing jumps 5%, Nasdaq hits record

OPEC, Allies Near Agreement for Small Production Increase

U.S. service sector activity slows to six-month low in November: ISM survey

2020 November US Job Cuts Report: 64,797 in November, Up 45% From November 2019

France sees sharpest decline in service sector activity since May

New COVID-19 lockdown restrictions weigh on
German service sector activity in November

Euro area unemployment at 8.4%; EU at 7.6%

Industrial producer prices up by 0.4% in the euro area and by 0.3% in the EU

Volume of retail trade up by 1.5% in both euro area and EU

France Floats Veto Threat on Brexit Deal as EU Feels Strain

Renewed downturn in UK service sector activity, but optimism reaches its highest level since February

Over pizzas, EU-UK negotiators push for deal but outcome uncertain – EU official

Upcoming Potential Catalysts on the Economic Calendar

Australia Retail Sales at 12:30 am GMT (Dec. 4)

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 that the pair just broke above a strong resistance area around the 77.00 major psychological level. Will this draw in momentum traders to play the recent move higher? Or is this a reversal in the making?

Well, we’ve got the latest Australia retail sales data ahead to potentially give the Aussie a kick in volatility, and if it does come out better-than-expected, maybe we could see more bulls come to play like we did in the euro after he Euro area released its retail sales data today.

If you’re bullish on AUD/JPY and want to get in ahead of that data, look out for a pullback to the broken resistance area and see if we get bullish reversal patterns around 77.00. That could signal a very short-term bottom, a highly probable scenario if broad risk sentiment continues to stay positive as it has been for the past few weeks.

If you’re bearish on AUD/JPY, it would likely take both disappointing retail sales data from Australia and a negative turn in broad risk sentiment before traders turn bearish on AUD/JPY. The catalysts for a turn in risk sentiment would likely come from negative covid vaccine news or some sort of surprise geopolitical news event (e.g. “no-deal Brexit”, failure of new stimulus in the U.S., etc.). It’s a low probability case at this point, but if it happens, the volatility could be significant.

But if something like that does play out, look to short AUD/JPY at current levels up to the 78.00 handle, which could also draw in technical traders as we see a bearish divergence between price and the stochastic indicator, marked on the chart above.