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Our Forex strategists have been sensing the forex movement in Comdols this week, focusing on key inflation updates from Australia and Canada.
Of the four scenario/price forecast discussions this week, Two discussions saw both financial and technical arguments raised To become a potential candidate for Risk Management Check out our review of this discussion to see what happened!
Watchlists are discussions about price forecasts and strategies supported by fundamental and technical analysis, and are a crucial step towards creating… High quality business idea estimate Before working on a risk management and trading plan.
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EUR/CAD 1 Hour Forex Chart by TradingView
Our strategists began Monday with a look at the Canadian dollar, focusing on the upcoming Canadian CPI update as the catalyst for potential big moves in the CAD.
According to our Canadian Consumer Price Index Event Guide While expectations were that the latest data would point to a continuation of the slowing trend in inflation growth, which supports recent market speculation that the Bank of Canada will cut interest rates in July.
If this event scenario came true, we would have been waiting for it to happen. Bullish breakout of the descending triangle developing on the USD/CAD pair For short Loonie settings. Now, if the latest Canadian CPI surprises the markets with a hotter reading, we have a bearish EUR/CAD pair on the watch list for CAD’s upward movement, which is a good alignment given the recent weak PMI and political uncertainty from the Eurozone. The possibility of keeping euro speculators in play.
Good, Canada’s CPI update came in hotter than expected With headline inflation accelerating from 2.7% y/y to 2.9% in MayThis led to a significant rally in the Canadian dollar immediately after the jump, and with continued trading below the 1.4650 psychological minor area, our short fundamental and technical arguments for the EUR/CAD pair were galvanized in the process.
But the rally was short-lived, with half of the move retraced within the first hour, then giving up more as the week progressed. This is likely due to the euro’s strength, European Central Bank officials reduce expectations of interest rate cuts this week Rather than a “buy the rumor, sell the news” attitude, given the broad move in the euro starting on Wednesday.
So timing, risk, and trade management were very big factors in determining whether this discussion supported a net positive outcome. We mentioned that the EUR/CAD pair could rise before the CAD. Consumer Price Index This event was, it did happen, and for those who shorted there after resistance formed, they likely saw very positive results, especially if they took profits shortly after the CPI was released.
For those who sold immediately after the event, they likely saw a net negative result, again, depending heavily on the trade structure used. For those who waited and sold later in the week after the bounce, the odds are that risk managers saw a small net positive result.
Overall, with markets reacting as expected after the event, but choppy price action and Euro strength shaping up, we’d say this discussion was likely “neutral to net negative” in support of a potentially positive outcome.
EUR/AUD currency pair 24 hours a day Chart by TradingViewp
On Tuesday, the Australian dollar rose to the top of the watch list as the latest CPI update from Australia was just around the corner. Ours Australian Consumer Price Index Event Guide The update showed that the latest data points to a result showing inflation to remain “flatly” high in May.
If this is the outcome, our strategists would be watching the EUR/AUD downtrend for a potential long play on the AUD, again, due to recent weak Eurozone PMIs which are likely to keep the Euro rate cut speculation alive.
In the scenario where Australian CPI data showed a decline in inflation (potentially reducing the chances of the RBA keeping interest rates high), we then switched to AUD/USD for short Australian settingsgiven current expectations that the Fed will have to make fewer rate cuts in 2024 than previously thought.
Well, the big day has arrived for the Australian dollar, and as expected, inflation data showed not only a persistent high inflation environment in the Land Down Under, but also Prices rose at a faster-than-expected 4.0% – the highest level in six months!
This clearly supports the potential hawkish comments from the Reserve Bank of Australia, so it was no surprise that the Australian dollar rose against all major currencies, which is probably why the Australian dollar closed as the best performer this week among major currencies.
In the EUR/AUD pair specifically, the pair fell sharply on the initial release, then attracted more sellers in the next five hours before finding support above the 1000 support level. Pivotal support level S1As the euro’s strength begins to develop on a large scale.
The strength in the euro was enough to bring the pair back to pre-Australian CPI levels and the weekly pivot point area, which appeared to be a strong selling area as traders pushed the pair down quickly on Friday, possibly due to the shift in monetary policy. / Interest rate differential between RBA And European Central Bank Before the weekly close.
Just as with the EUR/CAD pair above, with volatile price action following the event, risk and trade management were a factor in determining whether this discussion was supportive of a positive outcome or not. Given that there was time to sell after the event and capture that entire move lower, as well as another opportunity to sell at the pivot point after the euro rose, we would say this discussion was “neutral to likely” being supportive of a net positive outcome.
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