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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!

Equity Markets Bond Yields Commodities & Crypto
DAX: 14033.56 +0.72%
FTSE: 6483.96 -0.37%
S&P 500: 3849.32 +0.51%
NASDAQ: 13660.24 +0.37%
US 10-YR: 1.144% +0.013
Bund 10-YR: -0.453% +0.014
UK 10-YR: 0.441% +0.069
JPN 10-YR: 0.059% +0.00
Oil: 55.44 -0.45%
Gold: 1,792.2 -2.33%
Bitcoin: 36,606.85 -3.73%
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Fresh Market Headlines & Economic Data:

Dow jumps 200 points amid solid economic data, rising for a fourth straight day

New U.S. jobless claims totaled 779,000 last week, the lowest since late November.

U.S. Senate Democrats prepare to push through Biden’s $1.9 trillion COVID-19 package

U.S. factory orders beat expectations in December

U.S. productivity posts biggest drop since 1981 in fourth quarter

Bank of England says banks will need six months to prepare for negative rates

Eurozone construction activity contracts at steepest rate since May 2020

In December 2020, volume of retail trade up by 2.0% m/m in euro area; Up by 1.4% m/m in EU

Fed’s Evans sees price spikes ahead, but policy steady

EU watchdogs may step in as retail share trades rocket

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

AUD/JPY 1-Hour Forex Chart
AUD/JPY 1-Hour Forex Chart

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 2020AU construction industry recovery strengthens into 2021Australia 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.)