Daily U.S. Session Watchlist: AUD/JPY

Daily U.S. Session Watchlist: AUD/JPY

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AUD/JPY hits the top of our watchlist to start the new week with the highly anticipated RBA interest rate decision around the corner. What are the expectations and will the downtrend hold?

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Fresh Market Headlines & Economic Data:

  • Coronavirus hits global factories, policy easing prospects rise
  • Oil up as hopes of OPEC cut, stimulus counter virus gloom
  • BOJ reassurance on coronavirus bolsters speculation of global policy action
  • The ISM manufacturing PMI fell to 50.1 in February from 50.9 in January
  • Canada Manufacturing PMI: Modest rebound in manufacturing output during February 
  • Big central banks discussing coronavirus-related volatility: ECB
  • EU ready to loosen purse strings as coronavirus bites economy
  • Eurozone PMI rises to one-year high, but supply-side constraints emerge
  • UK manufacturing expands at fastest pace since April 2019, but supply-chain disruptions grow
  • Coronavirus slams the brakes on Australian manufacturing
  • BOJ buys ETFs on Monday, breaks away from usual pattern
  • Japan’s factory activity shrinks at fastest pace since 2016 on coronavirus hit
  • Swiss National Bank to double payout after posting $50 billion profit

Upcoming Potential Catalysts on the Forex Calendar for U.S. & Asia:

  • Australian New home sales, Building permits, & Current account at 12:30 am GMT (Mar. 3)
  • RBA Interest rate decision at 3:30 am GMT (Mar. 3)
  • Japan Consumer confidence at 5:00 am GMT (Mar. 3)
  Forecast for USD/JPY on Feb 7, 2020 - Forex Alchemy

What to Watch: AUD/JPY

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

Expectations are pretty high that the RBA will cut interest rates by 25 basis points, possibly even 50 basis points from the current rate of 0.75%, but of course, we won’t know until we get there. What we do know, though, is that the odds are pretty high of the Aussie moving around this event, which means good odds of short-term opportunities for traders are on the way.

If you’re a bear on AUD/JPY based on the downtrending price action seen above on the one hour chart, and on the broad risk aversion sentiment driving traders into the Japanese yen lately, then an actual rate cut could be in your favor.  But with the chance that the a rate may already be priced in, it is prudent to wait for the event to see the reaction before taking a bearish, in case the Aussie pops on profit taking.

If that scenario plays out, watch the 61% Fibonacci area and falling highs pattern for a retest and resistance behavior before considering a short position.  If that plays out, you’ve got a pretty good potential short-term return-on-risk if targeting the recent swing low (around 69.50) and the daily ATR of around 90 pips as your stop guide.

If you’re a bull on AUD/JPY, a combination of fading coronavirus fears and the RBA holding off on any rate cuts are the scenarios to watch out for before considering a long position on the pair. If that scenario plays out, watch for a break above the Fib area and falling “highs” pattern before mapping out a trade plan to go long. For the more conservative speculators, a break-retest-hold pattern is the behavior to watch out for to raise the odds of a successful trade.

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