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Today, we’re looking at a potential opportunities on AUD/JPY ahead of economic updates from Australia and Japan, as well as potential geopolitical catalysts.

Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on GBP/AUD as risk appetite stays positive, 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 touches record to start 2021, then falls 300 points

ISM Manufacturing PMI rises to 60.7 in Dec. vs. 57.5 in Nov.

The Canadian Industrial Product Price Index fell 0.6% m/m in November, while the RMPI increased 0.6% m/m

Global dairy prices rose +3.9% since the last auction on Dec. 15

German retail turnover in November 2020: +1.9% m/m; +5.6% y/y

Spain’s average unemployment rate in 2020 was likely below 16%, official says

German unemployment falls unexpectedly in December

Annual growth rate of broad monetary aggregate M3 in the euro area increased to 11.0% in November 2020 from 10.5% in October

U.K.’s Sunak to set out more aid for lockdown-hit businesses

The Swiss consumer price index (CPI) fell by 0.1% m/m in December 2020

US Treasury Announces Support for Stablecoins, Bitcoin drops below $30,000

Upcoming Potential Catalysts on the Economic Calendar

Fed Williams speech at 8:45 pm GMT
Fed Evans speech at 8:45 pm GMT
API Crude oil stock change at 9:30 pm GMT
Australia Services PMI at 10:00 pm GMT
RBA Chart Pack at 12:30 am GMT (Jan. 6)
Japan Services PMI at 12:30 am GMT (Jan. 6)
China Services PMI at 1:45 am GMT (Jan. 6)
Japan Consumer confidence at 5:00 am GMT (Jan. 6)

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 an uptrend, one that actually goes all the way back to the beginning of November when the pair bottomed out just above the 73.00 handle.

But to start off this new year price action has consolidated, trading closer and closer to the 79.50 minor psychological level and creating a semi-symmetrical triangle on the chart above.

Volatility could pick up in the upcoming session on the pair with the help of economic updates from both Australia and Japan, and maybe even a little reaction to the latest Chinese services PMI update as well.

We’ve also got the Georgia Senate elections in the U.S. to potentially influence the fiscal outlook for the U.S., which could spark broad risk sentiment reactions across the financial markets.

There’s a lot of potential for AUD/JPY to break out of the tightening pattern, and if you’re a bull on AUD/JPY, then the situation to watch out for is better-than-expected economic updates before getting too bullish.

This scenario would likely be positive for risk sentiment, and if the market does break and hold above the falling highs pattern on the chart above, the odds of the longer-term trend higher continue to remain strong.

If the economic updates come out weaker-than-expected and the pair breaks below the consolidation pattern marked above, then a short-term counter-trend move may be the outcome as traders take profits and/or initiate fresh shorts. This is a low probability scenario at the moment, but one to be aware of.