AUDJPY may be Ready for Next Leg Lower

Later, markets will get their first look at how Australian consumers feel about the US-China trade deal. What is good for China is good for Australia as the economies are inherently tied through China’s demand for Australian goods. The Westpac Consumer Confidence Change for January will be released with -0.4% expected vs -1.9% last. In addition, the Westpac Consumer Confidence Index will be released with and expectation of 94.7 vs 95.1 last. A reading of 92.8 in October 2019 tested lows not seen since 2015. It will be interesting to see if the US-China trade deal increased optimism or if the devastating wildfires will have taken a toll on consumer expectations.

Although not factored into the consumer confidence data for January, one must consider how markets will react to the ongoing Coronavirus, as a small number of cases have been discovered in different counties in Southeast Asia, 1 in Australia, and 1 in the US. The CDC in the United States said they expect to find more cases in the US.

If the consumer confidence data is worse and if the number of cases of Coronavirus continue to rise, what will be the impact on AUD/JPY? The Australian Dollar would likely selloff on bad data and the Japanese Yen will benefit from a flight to safety if more cases of Coronavirus are discovered.

AUD/JPY has already been in a downward sloping channel since early 2018. In August 2019, there was a failed break lower out of the channel that has since formed a rising wedge (which is corrective) back to the top trendline of the channel near 76.65. In addition, this is the 61.8% Fibonacci retracement level of the from the highs in mid-April to the lows on August 23^rd. The pair is already down .8% today and is forming a long bearish candle into the bottom trendline of the rising wedge near 75.00. The 200 Day Moving Average also comes across near 74.80.

Source: Tradingview, FOREX.com

If AUD/JPY breaks through the 200 Day Moving Average, there is horizontal support near 74.00. However, the target for a rising wedge is a 100% retracement of the wedge, which can be considered the next level of support down near 70.00. There is a confluence of resistance near the 76.65/77.00 area, which is the previously mentioned 61.8% retracement level, the top trendline of the downward sloping LT channel, and the upper trendline of the rising wedge.

Note that on Thursday Australia will release December Employment data. Expectations are for +16,000 vs a strong print of +39,900 last. This has potential to add more downside risk if the data is weak. If the wedge doesn’t break on the consumer confidence data or the coronavirus news, it may break on the Employment Change.

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account.

FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.

FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.

GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.