Canada’s got a few economic updates on the forex calendar this week, making this downtrend in CAD/CHF one to watch for short-term opportunities.
What kind of setups could we see for the bears? Or is there a potential trend reversal play ahead?
CAD/CHF 1-Hour Forex Chart by TradingView
What’s up forex fiends! We’ve got a textbook setup on CAD/CHF in the works, hitting the top of the watchlist as volatility is likely to pick up for the Canadian dollar this week. The forex calendar is showing Canadian trade data, inflation data, and retail sales on the docket, with the consumer price index data being the most likely being the biggest driver among the bunch.
Fundies drive direction and volatility, so it’s probably a good idea to get caught up with the fundies of the Canadian CPI update by checking out our discussion here, “Event Guide: Canada’s CPI Report (September 2023).”
Once you’ve done your homework and have a directional bias, you can come back to the 1-hour CAD/CHF chart to see potential patterns and setups that may fall inline with where you think prices are heading to next.
If you’re a bear, then you may have a slight edge here as the pair has been in a steady downtrend since the end of September. And recently in October, the market consolidated between 0.6640 – 0.6675, followed by a downside break, turning the 0.6640 level into a new resistance area.
Volatility picked up quickly last week due to geopolitical driver, first pushing the pair lower before a swift bounce back to the falling 100 simple moving average, where the pair found resistance.
If volatility and Canadian events push the pair higher to the confluence of technical patterns (falling moving averages & broken support-turned-resistance area), then a strong setup to watch is bearish reversal patterns form there before considering a short position risk management plan.
Given the daily average true range of around 43 pips, a momentum move could take the pair lower to the 0.6600 major psychological level, or possibly even the S1 Pivot level this week if volatility accelerates higher.
If you expect prices to move higher this week, then a textbook chart setup to watch is a sustained break above the technical confluence area around 0.6640.
This scenario may draw in technical buyers (short profit takers, breakout players), that could lead to a momentum move higher, again depending on the fundies.
Based on the daily average true range, a break there could see the market move higher to the top of the previous consolidation area (around 0.6675), or possibly the 0.6700 -0.6710 area (R2 Pivot level) before technical sellers start joining the game.