Forex Analysis – Trade of the Day: AUD/JPY 11th November 2014

Australia – National Australia Bank (NAB) Limited Business Confidence Index

Today, at GMT 12:30 a.m., the National Australia Bank (NAB) Limited released its monthly business confidence index figure. This figure measures the level of a diffusion index based on a survey of 350 businesses in Australia.

The survey asks respondents to rate the current business environment in Australia. Since businesses are the first to react to changing business conditions, the level of their sentiment regarding optimism and business confidence, acts as a leading indicator of the overall economic health in the coming months.

Last month, in October, the NAB business confidence index came out at 5, where any figure above 0 indicates improving conditions. This month, however, the NAB business confidence figure came out slightly lower, at 4.

Japan – Tertiary Industry Activity

At GMT 11:50 p.m., the Japanese Ministry of Economy, Trade and Industry will release the month over month tertiary industry activity figure, which measures the changes in the total value of services bought by tertiary businesses in Japan.

Since Japanese businesses increase their purchases of various services in order to expand their business when they feel optimistic, the tertiary industry activity figure is considered by economists and market participants as a leading indicator of the overall Japanese economy.

Last month, the Japanese tertiary industry activity went down by 0.1%, and the forecast for this month is set at an increase of 0.9%. Any increase above 1% would indicate that the Japanese economy is growing at a faster than expected rate, which will certainly have a positive impact on the valuation of the Yen against other major currencies.

Trade Recommendation for the AUD/JPY

Chart AUDJPY, D1, 2014.11.11 12:22 UTC

The AUD/JPY broke the downward sloping trend line on October 30, as the daily candle closed above the trend line. Furthermore, the AUD/JPY price also managed to close above the historical resistance level, 96.25, on the same day. Subsequently, the AUD/JPY broke above the October 30 high in November and broken the 100% retracement level of the previous downward swing.

Earlier today, when the NAB business confidence index came out lower compared to last month, the bullish momentum completely ignored the data and continued to surge above 99.70, which was the previous high from November 5.

Currently, the AUD/JPY is trading above the big round number, 100. If the daily candle for this pair closes above 100 by the end of New York session today, it would indicate a CALL in the AUD/JPY. Traders should target the 161.8% Fibonacci extension level for exit which is at 102.95.

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About our Forex Analyst:  Asif Imtiaz

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