Daily U.S. Session Watchlist: AUD/JPY

AUD/JPY bulls are looking good after last week’s upside breakout, but will they hold onto their gains with potential catalysts coming from Australia and Japan?

Fresh Market Headlines & Economic Data:

Bitcoin tops $50,000 for the first time

Dow rises 100 points to a record as February rally continues

Yellen shift on vast Treasury cash pile poses problem for Powell

The Empire State Manufacturing Survey’s general business conditions index increased to 12.1 in February from 3.5 in January, the highest level since September.

International transactions in Canadian securities generated a net outflow of funds of $21.9 billion from the Canadian economy in December.

European stocks rise to near one-year high on commodity gains

German investor morale surges on shopping spree expectations

Central Bank Digital Money Won’t Replicate Cash, Sweden’s Riksbank Says

Italian exports decreased for both EU countries (-3.7%) and non EU countries (-3.9%). Imports fell by -1.1% for both EU countries and non EU countries.

GDP and employment flash estimates for the fourth quarter of 2020 GDP down by 0.6% and employment up by 0.3% in the euro area; In the EU, GDP down by 0.4% and employment up by 0.3%

Upcoming Potential Catalysts on the Economic Calendar

Fed Kaplan speech at 6:00 pm GMT
Fed Daly speech at 8:00 pm GMT
U.S. Net Long-term Tic flows at 9:00 pm GMT
Japan Tankan index at 11:00 pm GMT
Japan Trade Balance, Machinery Orders at 11:50 pm GMT
Australia Leading Index at 12:30 am GMT (Feb. 17)
RBA Kent speech at 1:00 am GMT (Feb. 17)

What to Watch: AUD/JPY

On the one hour chart above of AUD/JPY, we can see that the pair has been on a solid rally after breaking above the short-term range between 80.80 to 81.20 last week. It appears the rally has topped out around the 82.40 handle at the moment, now pulling back to the 82.00 major psychological handle and chopping around there.

We’ve got potential low to mid-tier catalysts coming from both Australia and Japan, but nothing of major note at this time. So the market could pick a direction during the Asia session when they release, and only likely if there is a large divergence between the actual reads and expectations.

So for now, broad risk sentiment is likely to drive the pair for now, and with the markets leaning positive, the odds are in favor of the bulls at the moment. If conditions hold and the data looks positive, watch out for bullish reversal patterns if the market dips a bit further from here (around 82.10) for a potential short-term / swing trade higher. Of course, if the market breaks above today’s high around 82.41, then that could draw in more buyers for a momentum play higher.

For the bears, if we see negative economic updates and a broad shift in risk sentiment towards negative, look for a break below the rising trendline. This would likely draw in sellers, or profit taking from the rally this past week.