It’s been a very busy week for the forex calendar, bringing both opportunities and potential challenges for our strategists this week.
Arguably it was a very efficient week as we had two out of four strategies that were able to be on the right side of the strong short-term momentum moves.
AUD/USD for two hours Planned by TV
On Monday, we saw another drop in the Australian dollar to start the week during the Asian session, this time likely in reaction to weaker-than-expected GDP and retail sales data from China. This again supports expectations that economic conditions are weakening in China, one of Australia’s largest trading partners.
We thought volatility would still be high on the inside Australian dollar / US dollar With the latest RBA meeting minutes, Australian employment data and US retail sales ahead, we discussed different up and down scenarios for the pair depending on the outcome of these events. Well, our high volatility expectations came to naught as the heavy calendar spurred several moves/trends this week.
First, the RBA minutes showed that the RBA was still open for tightening in August, but it didn’t seem to have had much of an impact as AUD/USD traded lower after the event. We saw moves after the US retail sales update for the month of June, which came in below expectations and the previous month, which could push the pair downward due to the growing recession fears.
It was the Australian jobs update that quickly got the markets into AUD/USD on Thursday, and boy was it an interesting moment as traders really started buying before the data was released, and then picked up the pace after the data came out better than expected.
But the AUD/USD’s upside was short-lived as US weekly jobless claims attracted dollar bulls during Thursday’s US trading session.
Whether or not this is effective is hard to say given the amount of post-event adjustments in perspective that would have to be made, but we think that if signals of Chinese and US economic weakness were the underlying theme of the bearish bias, then this could be said to be a viable pair to trade this week.
AUD/CAD vs. Crude Oil Futures: 30 minutes in forex Planned by TV
On Tuesday we signaled a short-term downward channel in AUD/CAD, which is likely to be driven by a combination of weak sentiment due to weak Chinese data, and some support for the Canadian dollar from higher oil prices.
We have been monitoring future Canadian CPI updates for the potential impact on the Canadian dollar, with expectations to show further softening in inflation conditions, and if so, could lead to an upward breach of the descending channel.
We also mentioned that if the Canadian CPI data surprises positively, we think so Australian dollar / Canadian dollar It could move lower with the current trend to retest the secondary psychological area 0.8950, which is the scenario we have been inclining towards, mainly due to the bearish momentum.
Canadian CPI data showed a slowdown both in the month and year, and we saw a temporary bearish reaction in the Canadian dollar, but no breach of the upward channel at all. And it didn’t take long to attract CAD buyers, which correlates with the bullish turn in oil prices from the $74 handle that kicked off on Tuesday.
This was likely the main driver of the broad move in the AUD/CAD this week, benefiting us from the pair’s bearish bias, and it was enough to attract sellers back after a short-lived rally to the upside after Thursday’s better-than-expected Australian employment update.
GBP/AUD forex 30 minutes Planned by TV
After the UK printed a weaker-than-expected CPI update on Wednesday, we set our sights on British pound / Australian dollar The volatility took the pair into a major support pattern area on the 15-minute chart.
With Australia set to release their employment updates during the Thursday Asian session, we have seen the volatility potential build rapidly for the GBP/AUD, and the pattern of support seen is likely to attract traders to build off of, with direction dependent on how the data performs.
Overall, we went bullish on the pair due to market expectations of a weak Australian jobs update, which was quickly negated as Australia printed a stronger than expected update. This attracted sellers relatively quickly and pushed the pair down to the minor psychological level of 1.8850 before exhausting selling.
We were unlucky in the GBP/AUD price forecast on Wednesday for our bullish bias, but if you are able to quickly adapt to the surprise Australian jobs update and sell on the trend line break, it is likely to produce a positive outcome for the short-term bears who manage risk well.
GBP/CHF 30 min forex Planned by TV
On Thursday, we looked forward to the upcoming retail sales event in the UK and will likely be tempted to buy the British pound on expectations that the UK will provide a positive update on retail activity to consumers.
With this financial bias, we looked at British Pound / Swiss Franc It was forming a double bottom on the 15-minute chart. This pattern tends to attract technical buyers, and if risk sentiment is positive and/or UK retail sales come in positive, we thought a rally to retest the neckline level and pivot point (1.1120) was likely.
Not long after our announcement, the GBP/CHF shot higher during the US trading session, with no clear direct catalyst for the move. The British pound is broadly higher against the majors (excluding the US dollar), and after being battered for most of the week, it could be argued that this could be a case of reordering (ie covering shorts) ahead of the UK retail sales update.
Whatever the case for the rally from the double bottom, GBP/CHF easily reached our discussed targets, first the ‘neckline’ around 1.1100, then the pivot point line around 1.1120. It actually had enough momentum to reach the R1 pivot point area, shown on the chart in our original discussion.