AUDJPY Forecast for 11th - 15th November 2013

I discovered a neat COT / sentiment chart at  TimingCharts. If you're looking for free COT / market sentiment information, this is a useful resource.

WEEKLY FORECAST FOR 11th - 15th November

News / Fundamentals

USD

US NFP beat expectations last Friday, so short-term USD momentum should be bullish. This increases the probability of the Fed tapering in the next few months, especially if good news continue. The debt ceiling deadlock between Obama and the Republicans hasn't been resolved though, but I think the market will ignore this until January 2014. 

If tapering is on the cards, what does this mean for the AUDJPY? With USD and EUR interest rates now very low, investors have been using them as alternatives to the JPY for carry trades. Carry traders may start switching their borrowings from the USD to JPY, so this is good news for JPY-paired carry trades. Specifically, this should benefit the AUDJPY and NZDJPY. If the US is improving, this should increase appetite for risk, which is also beneficial for carry trades. 

EUR

The major EUR headline from last week was the ECB's reduction of interest rates to 0.25%. This is on par with the Federal Reserve's range of 0.0 - 0.25%. This should benefit EUR-based carry trades, especially the EURAUD and EURNZD, but harm competing carry pairs like the AUDJPY and NZDJPY.  

However, the stimulus should be beneficial for the world economy and provide a boost for commodity prices, which especially benefits Australia. I think this is how the market saw it last week.

AUD

The RBA chose to maintain its current interest rate at 2.5% last week, although the RBA has indicated its willingness to reduce rates if needed. The next meeting is scheduled on December 3. This means that bulls should have a window for the next few weeks to drive the AUD up without RBA intervention. Bears will be staying out. 

JPY

I haven't observed any important JPY events for the last week.

How this fits together

News verdict: moderately bullish

Sentiment

OANDA's COT report indicate that the large traders are more bearish on the JPY than the AUD. 

Sentiment verdict: moderately bullish

Technical Analysis

Volatility on Friday fell significantly, as we probably saw some short profit-taking before the weekend. This means many of the bears on Thursday are now out.

In light of bullish news and sentiment analysis, we may see an ascending channel forming. If this is the case, I would look for longs on Monday and possibly ride it for the next week or two.  92.500 would make a good support level since it's near Thursday's and Friday's lows and would make the bottom of the ascending channel that I've graphed below. I'd place my SL just below 92.000. TP would be towards the top 25% of the channel. 

Intra-day, I'd be looking for longs on Monday.

That wraps up my plan for next week. I may be completely wrong as this is the first time that I've used all three forms of analysis (fundamental, sentiment and technical).