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Checking out AUD/JPY today ahead of potential catalysts from Japan, Australia and China. Is the recent upside breakout a signal that the pair will move higher?

Before moving on, ICYMI, today’s Daily London Session Watchlist looked at a technical opportunity forming on AUD/NZD, so be sure to check that out to see if there is still a potential play!

Equity Markets Bond Yields Commodities & Crypto
DAX: 13995.43 -0.46%
FTSE: 6529.94 +0.10%
S&P 500: 3907.39 -0.21%
NASDAQ: 13997.30 +0.07%
US 10-YR: 1.14% -0.02
Bund 10-YR: -0.448% +0.00
UK 10-YR: 0.463% -0.014
JPN 10-YR: 0.069% +0.00
Oil: 57.92 -0.09%
Gold: 1,839.60 +0.29%
Bitcoin: 46,517.75 -0.35%
Ethereum: 1,732.75 -0.39%

Fresh Market Headlines & Economic Data:

Stocks slip from record highs as market rally takes a breather

U.K. Retail sales fall as new variant of virus spooks consumers

Oil hits 13-month highs on supply cuts, weak dollar

ECB’s Panetta floats 3,000-euro limit on digital cash

Italian industrial production fell by 2.0% in December

French economy stabilizes at 5% below pre-pandemic levels

China January bank loans surge to record, credit growth slows

Upcoming Potential Catalysts on the Economic Calendar

API Crude oil stock change at 9:30 pm GMT
Australia Consumer confidence at 11:30 pm GMT
Japan PPI at 11:50 pm GMT
Australia Building permits at 12:30 am GMT (Feb. 10)
China Inflation at 1:30 am GMT (Feb. 10)

What to Watch: AUD/JPY

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

On the one hour chart of AUD/JPY, we can see the pair finally broke above a strong resistance area (just under the 80.50 minor psychological level) and rallying all the way up to 81.00 before buyers ran out of steam.

And not only did they run out of steam, but it looks like sellers are dominating at the moment as the pair pulls back, likely on profit taking given that we’re void of any major news or events on the session.

Volatility is likely to stay bid in the pair with potential catalysts coming from Australia, China and Japan in the upcoming Asia session, making this a pair to watch.

We’ll be specifically watching for this breakout to resume given the broad recovery / vaccine themes driving traders towards risk assets lately, but it makes sense to get a confirmation first that bears aren’t taking a longer-term hold on the pair.

We’re watching out for bullish reversal patterns at the Fibonacci retracement area marked on the chart above, which lines up with the previous resistance area. This setup makes sense to take, especially if Australian data surprises us with positive reads on both consumer confidence and building permits.

For the bears on AUD/JPY, it may not make sense to short the pair until global risk sentiment turns and we get negative economic updates from Australia. This scenario would likely draw in a quick sell reaction from the markets, but the risk-to-reward setup isn’t strong unless we’re seeing the market trade around 81.00 before this were to play out. With potential buyers lurking around 80.35 – 80.50, a downside move is likely limited unless we get a big, unseen news catalyst.