Daily U.S. Session Watchlist: AUD/JPY

Daily U.S. Session Watchlist: AUD/JPY

The markets reacted big time to the latest Coronavirus news over the weekend, prompting risk-off moves all around. So, will the momentum continue in AUD/JPY’s fall?

Intermarket Snapshot

Equity Markets Bond Yields Commodities & Crypto
DAX: 13010.01 -4.19%
FTSE: 7141.33 -3.55%
S&P 500: 3244.78 -2.82%
DJIA: 28116.27 -3.02%
US 10-yr 1.369% -0.101
Bund 10-YR -0.478% -0.045
UK 10-YR: 0.551% -0.042
JPN 10-YR: -0.07% -0.043
Oil: 50.96 -4.53%
Gold: 1681.3 +1.97%
Bitcoin: 9746.91 -2.60%
Etherium: 268.38 -3.35%

Fresh Market Headlines & Economic Data:

  • Dow sheds 800 points as pandemic fears grip Wall Street
  • Oil prices slide 4% on demand concerns as virus spreads
  • Canadian Wholesale sales rose 0.9% to $63.9 billion in December, following two consecutive monthly declines.
  • Rate futures surge as coronavirus seen pushing Fed to ease
  • Seventh person dies in coronavirus outbreak in Italy: ANSA news agency
  • South Korea declares highest alert as infections surge
  • PM on Brexit collision course with France over ‘blackmail’ claim

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

  • Bundesbank Beermann speech at 4:00 pm GMT
  • Bank of England Haldane speech at 6:30 pm GMT
  • Fed Mester speech at 8:00 pm GMT
  • Japan Leading economic index at 5:00 am GMT (Feb. 25)

What to Watch: AUD/JPY

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

Ugly start to the new week for global risk sentiment after a surge in new Coronavirus cases in South Korea and Italy prompt risk-off behavior right at the open. This meant a strong start for the Japanese yen (typically a big beneficiary of risk-off environments) and a weak one for the Australian dollar, which is often traded as a “risk-on”/ China proxy asset. AUD/JPY gapped lower from last week’s close (73.92) to open at 73.26 this week, and after a gap fill during the Asia session, the bears took the pair lower to session lows and currently trading around 73.20. The current trading area is a previous support area that drew in the bulls twice earlier in February, so the question now is whether or not it’ll hold once again.

For the bears, watch out for a break below this area if Coronavirus fears are sustained through the rest of the session. With a lack of major economic data ahead, this will likely remain the main driver and with no change to the situation, a downside break of the support is a good signal the bears will stay in control and possibly take the pair to the next support area (around 72.50).

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For the bulls, an argument could be made that the sellers are exhausted here after making two trips lower from last week’s close more than the daily ATR (68 pips). Bullish reversal patterns around the 73.00 – 73.20 area could be a signal of a short-term bounce ahead, but given that it is counter to the main driving themes and price action, it is a higher risk to take. Going small (small position size and small target) is a viable option in this scenario for a very short-term trade.

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