Downbeat Chinese inflation readings seem to have weighed on the safe-havens today.
Can this mean a bullish breakout for AUD/JPY soon?
Before moving on, ICYMI, yesterday’s watchlist looked at NZD/USD’s range support test ahead of the Chinese inflation reports. Be sure to check out if it’s still a good play!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
Moody’s downgraded 10 mid-size regional U.S. banks and put six other lenders on notice under review
FOMC member Harker suggests they have reached a point where they can hold interest rates steady, might even start cutting rates next year
U.S. trade deficit narrowed from $68.3 billion to $65.5 billion vs. $65.1 billion estimate in June, as exports dipped 0.1% while imports fell 1.0%
U.S. IBD/TIPP economic optimism index fell from 41.3 to one-year low of 40.3 in August vs. 43.0 forecast
Chinese headline CPI down by 0.3% y/y in July vs. estimated 0.4% decline and previous flat reading, headline PPI down by 4.4% y/y vs. previous 5.4% slump and expected 4.0% fall
New Zealand quarterly inflation expectations ticked higher from 2.79% to 2.83% q/q, suggesting a potential pickup in price pressures over the next two years
Price Action News
Relatively cautious remarks from FOMC member Harker weighed on the U.S. currency in the previous New York trading session, before the safe-haven selloff picked up on downbeat Chinese inflation data.
As it turned out, both CPI and PPI figures reflected significantly weaker price pressures, upping the odds of more stimulus efforts from the Chinese government and central bank.
Rumors that China’s state-owned banks were selling the dollar versus the yuan also contributed to the dollar’s decline.
Upcoming Potential Catalysts on the Forex Economic Calendar:
Canada’s building permits at 12:30 pm GMT
EIA crude oil inventories at 2:30 pm GMT
Australia’s MI inflation expectations at 1:00 am GMT (Aug. 10)
Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! 🔥 🗺️
AUD/JPY: 15-min
Check out this forex pair hanging out at the very top of its short-term range!
Is AUD/JPY in for a bounce or a break?
Risk appetite seems to have been in play over the past few hours, thanks to a combination of dovish FOMC rhetoric and the prospect of additional easing from China.
After all, downbeat trade data from the other day and weak inflation reports released in today’s Asian trading session are increasing the pressure on the Chinese government to share more details on its stimulus plans.
A break above the range resistance at the 94.00 handle could set off a rally to R1 (94.23) or perhaps even R2 (94.64) while a bounce might drag AUD/JPY back down to the bottom at 93.00 or S1 (93.15).
There’s not much in the way of top-tier releases in the next trading sessions, as traders are holding tight ahead of the U.S. CPI report on Thursday. This means that the pair might simply stay in range and could just dip back to the pivot point (93.56) around the middle.
