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AUD/JPY has been on a rocket ship higher; is it time for the pair to take a breather and pullback. If so, where are the opportunities for the short-term bulls to get long?

Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on USD/JPY ahead of U.S. GDP data, so be sure to check that out to see if there is still a potential play!

Equity Markets Bond Yields Commodities & Crypto
DAX: 13912.19 -0.46%
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S&P 500: 3895.83 -0.75%
NASDAQ: 13438.38 -1.20%
US 10-YR: 1.477% +0.088
Bund 10-YR: -0.231% +0.071
UK 10-YR: 0.797% +0.064
JPN 10-YR: 0.141% +0.024
Oil: 63.12 -0.16%
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Bitcoin: 50681.75 +0.71%
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Fresh Market Headlines & Economic Data:

Dow retreats 200 points from a record high, tech stocks get hit again amid rising rates

Orders for U.S. durable goods climb 3.4% in January

Fed’s George says rise in long-term rates a sign of optimism

U.S. Real gross domestic product (GDP) increased at an annual rate of 4.1% in the fourth quarter of 2020

Global government bonds hit by fresh wave of selling

Annual growth rate of broad monetary aggregate M3 stood at 12.5% in January 2021, after 12.4% in December 2020

German consumer morale improves more than expected heading into March: GfK

UK lowers COVID-19 alert status as pressure on hospitals eases

Upcoming Potential Catalysts on the Economic Calendar

Fed Bostic speech at 5:00 pm GMT
Fed Williams speech at 8:00 pm GMT
Japan Tokyo CPI at 11:30 pm GMT
Japan Industrial Production, Retail Sales at 11:50 pm GMT
Australia Private Sector Credit at 12:30 am GMT (Feb. 26)
Japan Housing Starts, Construction Orders at 5:00 am GMT (Feb. 26)

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 bulls are winning big, especially over the past week after a consolidation breakout around the 83.50 area.

But after a full weekly ATR move to the upside in just two days and the stochastic indicator signaling short-term overbought conditions, is a pullback right around the corner?

It’s tough to say, especially with potential low-tier catalysts coming soon from both Australia and Japan, and as broad risk sentiment may shift from positive to negative as government bond yields continue to shoot up higher.

That bond yield story is likely going to be the driver for the financial markets in the short-term, and with that likely to continue, the odds are growing that a turn lower in AUD/JPY could be ahead.

If that’s the case and you’re a longer-term bull on AUD/JPY, watch out for a pullback down to the Fibonacci retracement area, which also happens to line up with the broken short-term resistance area / major psychological level at 84.00. If you see bullish patterns there (and maybe even an oversold signal on stochastic), that could be the cue to the bulls to jump back in.

If you’re a bear on AUD/JPY, this could be a solid short-term opportunity to fade the longer-term trend higher. The odds are good for a successful move down to the Fib area / previous consolidation area if the upcoming economic updates disappoint and bond yields continue to rise and turn traders sour on risk assets.