We’ve got the latest interest rate decision coming soon from the Reserve Bank of Australia, making this range on AUD/JPY one to watch for the session.
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Fresh Market Headlines & Economic Data:
- Oil falls after Saudi Arabia, Russia delay meeting
- Bank of Canada Business Outlook Survey – Spring 2020
- Euro zone Construction activity falls at fastest rate for over 11 years
- Germany drafts plan to end lockdown, Spain’s daily death toll declines
- China sees rise in asymptomatic coronavirus cases, to tighten controls at land borders
- China’s vehicle production to drop 11.5% this year: IHS Markit
- Sentix Investor confidence drops in April to -42.9 vs. -17.1 in Mar.
- German Manufacturing in Feb. 2020: -1.4% m/m; +1.5% y/y
- Commodity prices continue to fall but offset by weakening dollar
- Japan launches $1 trillion coronavirus stimulus package as Prime Minister Abe announces state of emergency
- Japanese Consumer Confidence Index (SA) in March 2020 was 30.9, down 7.4 points from the previous month.
Upcoming Potential Catalysts on the Forex Calendar for U.S. & Asia:
- New Zealand Business confidence at 10:00 pm GMT
- Australia Ai Group Services Index at 10:30 pm GMT
- Japan Household spending & Average Cash Earnings at 11:30 pm GMT
- Australia Trade Balance, Job Ads at 1:30 am GMT (Apr. 7)
- Reserve Bank of Australia Interest rate decision at 4:30 am GMT (Apr. 7)
- Japan Leading Economic index at 5:00 am GMT (Apr. 7)
What to Watch: AUD/JPY
Busy calendar ahead for both the Aussie and the Japanese yen, but the likely driver for price action will be the latest interest rate decision from the Reserve Bank of Australia. Analysts are expecting changes or specific forward guidance from the RBA, but if there is surprise rhetoric or changes during the event, expect some action for the Aussie in the short term.
Even with low expectations of a big move, volatility may pick up enough for this simple technical setup on AUD/JPY to become a trade opportunity. On the one hour chart above, the pair is on the upswing thanks to today’s shift back to global risk-on sentiment (Wall Street opens higher on coronavirus slowdown hopes) and looks to retest the top of the recent range behavior, around the 67.00 – 67.50 area.
If retested and we do get weaker-than-expected rhetoric from the RBA, more stimulus, then a short play on AUD/JPY should be considered. If resistance and/or reversal short patterns emerge, then shooting for the bottom of the range is not out of the question for a short-term play given the daily ATR of around 170 pips.
If the RBA doesn’t give a worsened outlook and/or more stimulus ahead, then watch out for a break above the 67.50 handle for a possible short-term long position in AUD/JPY. This makes sense given expectations of a big stimulus coming for Japan to likely weaken the yen short-term, and on broad risk sentiment flipping positive today on slowing coronavirus cases/deaths news.
If these conditions hold and we do see an upside break, the major psychological level of 70.00 is an achievable short-term target given the more recent volatility.