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Volatility picked up early to give risk aversion traders a solid start to the week.

We can see this play out in AUD/JPY as the pair pulled back on the session, bringing the market to technical levels to watch for several different short-term opportunities.

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Fresh Market Headlines & Economic Data:

Stocks fall to start the week, pull back from record highs

House prepares to impeach Trump for his role in sparking Capitol attack

BioNTech says Covid vaccine is effective against key new strains; to publish more data in days

Bitcoin’s Biggest Plunge Since March Shakes Faith in Crypto Boom

Oil falls on renewed lockdowns, stronger dollar

Gold extends loss as receding inflation fears boost real yields

China pushes back against U.S. sanctions with new rules

Euro zone investor morale rises on vaccine euphoria – Sentix

Johnson threatens tougher lockdown if U.K. ignores covid rules

Bank of England’s Tenreyro sets out case for sub-zero interest rates

Australia Nov retail sales jump 7.1%

New Zealand Central Bank Says Data System Hacked

Upcoming Potential Catalysts on the Economic Calendar

Fed Kaplan speech at 11:00 pm GMT
Japan Current Account at 11:50 pm GMT
Japan Eco Watchers Survey at 5:00 am GMT (Jan. 11)

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 bulls have given the bears to start the new trading week, likely on a broad shift in global risk sentiment.

A catalyst doesn’t seem to be overly apparent for the move, so it may be defensive moves by traders after a strong risk-on rally to start the new year.

With no obvious direct catalysts for the pullback and with no major catalysts scheduled directly ahead, technical traders may hop into the longer-term uptrend.

On the chart, we can see the market is testing the Fibonacci retracement area, which also lines up with the previous swing high around 79.80, which could now draw in buyers who look to trade the classic “resistance-turned-support” setup.

Stochastic is also signaling short-term oversold conditions, which raises the technical argument that could draw in more buyers than sellers short-term.

If catalysts and risk conditions do not continue further towards aversion sentiment, it’s possible we may saw the fundamental traders take advantage of the pullback.

In that scenario, look out for bullish reversal patterns at the broken resistance area / Fibonacci retracement area for a potential short-term long position, or even a swing long position.

But if we do see a break below the Fibs and 80.00 major psychological handle, the move lower could pick up speed, especially if there are fundamental catalysts popping up to push traders to get more defensive this week.