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Checking out AUD/JPY ahead of top tier catalysts from both Australia and the Bank of Japan. Will it bring in the bulls or bears on this Fibonacci setup?

Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on GBP/USD ahead of UK CPI data and Biden’s inauguration, 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:

S&P 500 rises to all-time high ahead of Biden’s inauguration

Bank of Canada holds rates amid optimism for vaccine rebound

2 dead, several injured in Madrid as explosion rocks Spanish capital

Oil above $56 on U.S. stimulus hopes ahead of Biden inauguration

UK inflation starts climb as effects of COVID and Brexit combine

Upcoming Potential Catalysts on the Economic Calendar

Joe Biden’s Inauguration
API Crude oil stock change at 9:30 pm GMT
New Zealand Visitor Arrivals at 9:45 pm GMT
Japan Trade Balance at 11:50 pm GMT
Australia Consumer inflation expectations at 12:00 am GMT (Jan. 21)
Australia Employment at 12:30 am GMT (Jan. 21)
Bank of Japan Interest Rate decision at 3:00 am GMT (Jan. 21)

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’ve got a potential short-term setup for the bears in the works, a move that may play out if the upcoming Australian employment data disappoints.

After a strong move lower last week from 80.80 to 79.60, the pair has recovered to the strong area of interest around 80.25 that served as minor support earlier in January.

It looks like traders are using that as a strong resistance area as the pair fails to break above level, which also happens to be the 50% Fibonacci retracement area, and as the stochastic indicator moves lower from overbought conditions.

So, if we see weaker-than-expected Australian jobs numbers (expectations of slower increase and decline in unemployment rate) Aussie bears may show up, but the odds aren’t likely to be strong unless broad risk sentiment shifts towards negative. There are no catalysts expected for that scenario to play out, but it’s a good idea to be careful with this pair.

Also, the latest monetary policy decision will be coming out soon from the Bank of Japan. This is rarely a market moving event, but one that must be highly respected as any major surprises will likely draw a massive reaction in the Japanese yen. Expectations are for no new major stimulus moves, and potentially small changes to its quantitative easing policies.