Aussie bears have taken solid control recently, and with economic data ahead from both Australia and Japan coming soon, the momentum in AUD/JPY could be a train to jump on!
Before moving on, ICYMI, today’s Daily London Session Watch list looked at an opportunity forming on USD/CAD to play the recent ranges in FX, so be sure to check that out to see if there is still a potential play!
Intermarket Snapshot
| Equity Markets | Bond Yields | Commodities & Crypto |
| DAX: 13191.00 +0.49% FTSE: 7575.25 0.00% S&P 500: 3238.94 -0.23% DJIA: 28626.27 -0.27% |
US 10-yr 1.807% -0.004 Bund 10-YR -0.293% -0.006 UK 10-YR: 0.782% +0.011 JPN 10-YR: -0.026% +0.008 |
Oil: 62.74 -0.84% Gold: 1569.50 +0.04% Bitcoin: 7830.48 -0.89% Etherium: 140.37 -3.09% |
Fresh Market Headlines & Economic Data:
- Iran considering 13 “revenge scenarios” after U.S. strike
- Cyberattack and proxy violence warnings as Iran threatens ‘nightmare’ revenge against US
- December’s ISM non-manufacturing index signals better-than-expected expansion
- U.S. trade deficit drops to more than three-year low
- Canada Ivey PMI declines to 51.9 in Dec. vs. 60.0 in Nov.
- Canada posts trade deficit of C$1.09 billion in November
- Boris Johnson to push for a speedy trade deal in new Brexit talks with EU
- Spain gets coalition government after Sanchez wins parliamentary vote
- Euro zone inflation picks in December before early 2020 fall
- Volume of retail trade up by 1.0% in euro area; Up by 0.6% in EU28
Upcoming Potential Catalysts on the Forex Calendar for U.S. & Asia:
- Australia Construction Index at 9:30 pm GMT
- API Crude oil inventories at 9:30 pm GMT
- Japan Average cash earnings at 11:30 pm GMT
- Australia Building permits at 12:30 am GMT (Jan. 8)
- Japan Consumer confidence at 5:00 am GMT (Jan. 8)
What to Watch: AUD/JPY
Downside momentum picked up once again in the Aussie, as seen above in the one hour chart of AUD/JPY after a brief consolidation period just under the 75.00 major psychological handle. This is likely due to traders pricing in the possibility of further rate hikes from the RBA to support offset the likely set backs Australia will face in the aftermath of the terrible brush fires it’s currently battling, as well as the geopolitical risks from the recent actions between the U.S. and Iran. This momentum is likely to continue, and we may get a pick up in further volatility with the upcoming economic updates from both Australia and Japan.
But after a strong move lower on the session from a high around 75.25 to current levels around 74.45 (much more than the daily ATR of around 55 – 60 pips), this move could be ready for a bounce. We can see the stochastic signaling short-term oversold conditions, and there may be support from global risk flows as the fears of military retaliation from Iran on the U.S. fade a bit for now.
If you’re a bear on this pair, shorting at current levels up to the 75.00 handle is a sensible move, although what was discussed above, it may be more prudent to wait for a bounce to develop a trade with a better potential return-on-risk and higher probability if we see resistance there once again.
For the bulls, it’s a tough argument to make a long call at the moment, but if Australian data surprises positive, we see positive developments in Australia’s fight against the fires, AND geopolitical tensions continue to improve, then a case could be made for a long position. This scenario is especially attractive on an upside break-and-retest scenario of the 75.00 handle with bullish support patterns.
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