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!
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Fresh Market Headlines & Economic Data:
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
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.