With expectations of a lower volatility week, our strategists slowed it down a bit with only two forex discussions, surrounding the Australian CPI release.
Out of the 2 discussions, one scenario/price outlook forecasts saw each fundie & technical arguments triggered to turn into a possible candidate for a risk management overlay. Take a look at our review on that discussion to see what happened!
Watchlists are price outlook & strategy discussions supported by each fundamental & technical evaluation, an important step towards making a prime quality discretionary trade idea before working on a risk & trade management plan.
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AUD/JPY 1-Hour Forex Chart by TradingView
On Tuesday, the upcoming Australian CPI was our goal catalyst of the week, an event that tends to get the Aussie moving, especially on condition that it’s one in all the major inputs to reprice monetary policy expectations for the Reserve Bank of Australia.
In on our Event Guide for the Australian CPI update, most up-to-date business surveys showed a quickening in inflation growth, but market expectations were for the CPI rate to tick lower from 3.5% y/y to three.3% y/y.
Within the scenario where Australian CPI is available in hotter-than-expected, we focused on the strong uptrend in AUD/JPY for potential long Aussie setups. And within the scenario where the inflation update is available in below previous/forecast because the market expected, we discussed a possible short Aussie setup in AUD/CAD.
Well, it looks just like the business surveys were right on this case as Australian CPI got here in hotter-than-expected at 3.6% y/y, supporting the case for rates of interest to stay elevated in Australia.
This end result triggered our long AUD/JPY bias, and as expected based on our research within the Event Guide, AUD/JPY pulled back after the initial spike higher on the event.
In our original discussion, our strategists thought a pullback to the 104.00 major psychological handle could potentially attract longer-term fundie & technical buyers, however the pair actually fell all of the method to the S1 Pivot support level / previous strong support area from May twenty second.
This extra drop was likely resulting from the broad risk-off vibes sparked by rising geopolitical tensions and net hawkish commentary from FOMC officials Williams and Bostic supporting an elevated rates of interest outlook on Wednesday.
From the S1 Pivot support level / previous strong support area, technical buyers stepped in quickly, and with the assistance of U.S. Treasury yields falling in the course of the Thursday U.S. session, risk-on expressions like long AUD/JPY benefitted.
Overall, we’d rate this strategy/price outlook as “likely” when it comes to being supportive of a net positive end result.
AUD/JPY did pullback as discussed by our strategists on this particular scenario, and while the dip was deeper than expected, it was well throughout the each day ATR from the goal entry area. So the percentages were high that long players were capable of weather the dip.
For many who expressed long positions in the realm from the Pivot point right down to the S1 Pivot support level / previous strong support area, it’s highly likely the end result would have been net positive without highly complex risk/trade management on condition that AUD/JPY closed near intraweek highs on Friday.
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