Throwing this ranging pattern on AUD/JPY up for today’s watchlist as Aussie may pick up with catalysts coming soon from Australia.
Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on GBP/JPY ahead of top tier U.K. events, 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:
Upcoming Potential Catalysts on the Economic Calendar
Fed Daly speech at 7:00 pm GMT
Australia Services Index at 9:30 pm GMT
RBA Governor Lowe speaks at 10:30 pm GMT
RBA Statement on Monetary Policy at 12:30 am GMT (Feb. 5)
Australia Retail sales at 12:30 am GMT (Feb. 5)
Japan Leading Economic Index at 5:00 am
What to Watch: AUD/JPY
On the one hour chart above, we can see AUD/JPY in text ranging pattern going back to the middle of January 2020. The area just above the 79.50 area has served as solid support, while the 80.00 – 80.50 major psychological area has draw in sellers like clockwork. With resistance holding once again, is it time for another move lower?
Well, we do have potential catalysts for volatility coming soon from Australia, most notably the latest updates on monetary policy from the Reserve Bank of Australia. And if they’re anything than what we saw from the RBA earlier this week (RBA extends QE program, RBA’s Lowe Hails QE, Warns on Premature Stimulus Withdrawal), we could see a fresh move lower for the Aussie.
So, if you’re expecting more bearish than expected commentary from the RBA later, it may be a good idea to consider scaling into a short-term short position from current levels up to the top of the range. Or for the more conservative, may set orders to short if the pair bounces higher from current levels to the top of the range.
If you think that Governor Lowe will get a little more optimistic in his comments later, a possibility given the improving economic data (e.g. Australia’s exports up 3% in December 2020, AU construction industry recovery strengthens into 2021, Australia building approvals spike in December), then longing on a retest of the bottom of the range is probably the setup to wait for for a potential long swing position.
Don’t forget that AUD/JPY is a strong proxy for global risk sentiment moves, which means that the case for a short position grows if broad risk sentiment is negative and vice versa, the probability of AUD/JPY moving higher grows if broad risk sentiment is leaning positive (i.e., higher equities, higher bond yields, etc.)