Daily U.S. Session Watchlist: AUD/JPY

Daily U.S. Session Watchlist: AUD/JPY

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Volatility jumps after a busy weekend from central banks, making this technical setup on AUD/JPY one to watch ahead of data from Australia and Japan.

Intermarket Snapshot

Equity Markets Bond Yields Commodities & Crypto
DAX: 8916.71 -3.42%
FTSE: 5127.80 -4.44%
S&P 500: 2517.57 -7.14%
DJIA: 21376.82 -7.80%
US 10-yr 0.856% -0.101
Bund 10-YR -0.473% +0.112
UK 10-YR: 0.419% +0.011
JPN 10-YR: -0.002% +0.014
Oil: 30.22 -4.76%
Gold: 1516.7 0.00%
Bitcoin: 5110.52 -4.88%
Etherium: 114.08 -8.23%

Fresh Market Headlines & Economic Data:

  • Global central banks pull out all stops as coronavirus paralyzes economies
  • China’s economy skids as virus immobilizes factory, consumer sectors
  • Retail sales in China dropped by 20.5% after coronavirus hit, illustrating a scary difference between today’s crisis and 2008
  • Oil Slumps to Lowest Since 2016 as Demand Collapse Triggers Rout
  • Federal Reserve cuts rates to zero to support the economy during the coronavirus pandemic
  • Powell says the Fed doesn’t see negative rates as ‘appropriate’ policy for the United States
  • Empire State manufacturing index sees record decline to -21.5 in March
  • Australia’s central bank injects $3.6 bln liquidity into banking system
  • The RBNZ cuts the OCR by 75 bps in an emergency announcement, next step is a Large Scale Asset Purchase program if more support needed
  • Japan January machinery orders rebound, but virus fallout dims outlook
  • Bank of Japan raises ETF purchase limit to calm coronavirus fears
  • Swiss Producer and Import Price Index fell by 0.9% in February 2020

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

  • U.S. Net Long-Term Tic flows at 8:00 pm GMT
  • Japan Tankan index at 11:00 pm GMT
  • Reserve Bank of Australia Meeting minutes at 12:30 am GMT (Mar. 17)
  • Australia House Price Index at 12:30 am GMT (Mar. 17)
  • Japan Industrial production & Capacity Utilization at 4:30 am GMT (Mar. 17)
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What to Watch: AUD/JPY

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

What a day for the markets after a slew of central bank and government actions this weekend to combat the economic impact from the coronavirus outbreak. Volatility is likely to continue, and we’re looking at the AUD/JPY as we may see a little extra kick from upcoming Australian (house price index) and Japanese (Industrial production & Capacity Utilization, Tankan index) economic updates.

On the one hour chart above, AUD/JPY is currently bouncing higher from the drop during the Asia and European trading sessions, which brought on a low of 64.05. This may be just a dead cat bounce in a downtrend, and if you’re in the camp that there’s more risk aversion behavior to come, then watch out for potential resistance around the Fibs (starting around 65.50 up to 66.30); maybe even as high as the strong area of previous interest around 67.00. And with the daily ATR shooting up to over 200 pips, these are levels that could be easily reached within a session. If we see resistance / reversal patterns in this area, that’s a signal to start putting together a short play that could be successful on both short-term and medium-term time frames.

If you’re bull on AUD/JPY, possibly on the latest stimulus from central banks and/or the anticipation of more stimulus efforts coming to bring on positive risk sentiment, then you may want to consider a long position on a break (or break/retest/hold) above 67.00, with a target of around 69.00. Again, very reachable price levels given the extreme volatility we’re seeing, and if using the daily ATR as a stop guide, a long play still gives a decent potential short-term return-on-risk, despite the current trend lower.

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