The Australian Dollar hovered near support levels despite a surprise drop in the CBA Services as well as Composite PMI’s for August. This morning’s data was the latest sign that the global economy extends it slowdown which has increased hopes for more stimulus around the world. The AUDJPY pushed above its horizontal support area as bullish momentum rose. Can this breakout lead to more upside potential in this currency pair. Subscribe to the PaxForex Daily Fundamental Analysis and join one of the fastest growing trading communities in the forex market.
Further erasing bullish momentum during the Asian trading session were two economic reports out of Japan which indicated the economy is slowing. The Nikkei Manufacturing PMI clocked in below 50, indicating an extension of the contraction while the All Industry Activity Index plunged by 0.8%. The Bank of Japan has hinted that it will not tolerate a strong Japanese Yen as it hurts its export focused economy. Will forex traders rotate out of long Japanese Yen trades and how will this impact price action in the AUDJPY? This morning’s fundamental analysis will take a look in both directions.
Here is the key factor to keep in mind today for Australian Dollar trades:
- Australian CBA Manufacturing PMI, CBA Services PMI and CBA Composite PMI: The Preliminary Australian Manufacturing PMI for August was reported at 51.3. Forex traders can compare this to the Australian CBA Manufacturing PMI for July which was reported at 51.6.The Preliminary Australian CBA Services PMI for August was reported at 49.2. Forex traders can compare this to the Australian CBA Services PMI for July which was reported at 52.3. The Preliminary Australian CBA Composite PMI for August was reported at 49.5. Forex traders can compare this to the Australian CBA Composite PMI for for July which was reported at 52.1.
Here are the key factors to keep in mind today for Japanese Yen trades:
- Japanese Buying Foreign Bonds and Japanese Buying Foreign Stocks/Foreign Buying Japanese Bonds and Foreigners Buying Japanese Stocks: Japanese Buying Foreign Bonds for the period ending August 16th was reported at ¥499.7B and Japanese Buying Foreign Stocks was reported at -¥105.6B. Forex traders can compare this to Japanese Buying Foreign Bonds for the period ending August 9th which was reported at ¥175.8B and to Japanese Buying Foreign Stocks which was reported at ¥62.0B. Foreign Buying Japanese Bonds for the period ending August 16th was reported at -¥52.1B and Foreigners Buying Japanese Stocks was reported at -¥359.6B. Forex traders can compare this to Foreign Buying Japanese Bonds for the period ending August 9th which was reported at ¥545.5B and to Foreigners Buying Japanese Stocks which was reported at -¥187.1B.
- Japanese Nikkei Manufacturing PMI: The Preliminary Japanese Nikkei Manufacturing PMI for August was reported at 49.4. Forex traders can compare this to the Japanese Nikkei Manufacturing PMI July which was reported at 49.4.
- Japanese All Industry Activity Index: The Japanese All Industry Activity Index for June decreased by 0.8% monthly. Economists predicted an decrease of 0.7% monthly. Forex traders can compare this to the Japanese All Industry Activity Index for May which increased by 0.5% monthly.
Should price action for the AUDJPY remain inside the or breakout above the 71.700 to 72.550 zone the following trade set-up is recommended:
- Timeframe: D1
- Recommendation: Long Position
- Entry Level: Long Position @ 72.000
- Take Profit Zone: 73.900– 74.800
- Stop Loss Level: 70.950
Should price action for the AUDJPY breakdown below 71.700 the following trade set-up is recommended:
- Timeframe: D1
- Recommendation: Short Position
- Entry Level: Short Position @ 71.400
- Take Profit Zone: 69.750 – 70.000
- Stop Loss Level: 72.000
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