FX Play of the Day Recaps: May 29 – June 1, 2023

It was a strong week for our FX strategists, as arguably three out of five price scenarios played in our favour, including an expected strong bearish move for the AUD/USD.

Check out our quick recaps and tell us how you did this week in the comments section below!

Forex setup for the week: EUR/USDThe trend reversed ahead of the CPI and NFP reports

On Monday, we spotted a long term setup in EUR/USD as it retested a major trend line on the daily chart, ahead of potential catalysts from the Eurozone and the US.

We were bearish on the dollar due to the potential for some profit taking next, but we were also open to the idea that the next move from key technical territory would likely depend on the latest Eurozone CPI data and the US NFP report. .

Unfortunately, this week’s catalysts didn’t break the long-term momentum as USD traders couldn’t settle for direction, trying to balance risk sentiment (thanks to the US potentially avoiding a debt default), and US business survey data. Vulnerable, strength. Jobs numbers, and rhetoric from Fed officials regarding a possible “skip” of the June rate hike.

Weaker-than-expected Eurozone CPI data, along with another round of weak Eurozone PMI data, pressured the euro. This could eventually lead to a sustained break to the downside in the above daily chart if USD traders focus on the notion that the stronger-than-expected US employment reading in May could lead to more Fed rate hikes in the future.

Australian dollar / Japanese yen: Tue – 30 May 2023

On Tuesday, AUD/JPY climbed to the top of the watch list as the narrow consolidation in an ascending triangle pattern was a great setup to watch ahead of the Australian CPI data.

We were looking for a bearish break of the triangle during/after the CPI release to attract more technical sellers and some AUD fundamental sellers if the CPI number comes in below expectations, as it has in the past three releases.

The AUD/JPY pair actually fell not long after we put it on our watchlist, likely triggered by the broad risk sentiment during the US Tuesday session. Arguably this was due to uncertainty over whether the new debt-reduction legislation would actually be passed due to vocal opponents of the deal sounding early in the week.

AUD/JPY bears then got another boost in the following Asian session after traders shrugged off better-than-expected Australian CPI data to focus on surprising weakness from the recent manufacturing PMI read in China.

Through it all, our price forecast on AUD/JPY played well as the pair broke the triangle and made its way to our first target at S1 Pivot (90.78), and even moved down to 90.27 before breaking out.

Australian dollar / US dollar: Tue – 30 May 2023

Apart from our strategy on AUD/JPY above, we have also been eyeing AUD/USD for potential bearish moves ahead of the Australian CPI event.

The pair was already testing the top of the short-term channel, as well as the R1 pivot point area, a setup that had the potential to attract technical dollar bulls as well as fundamental players looking to short the Aussie based on our discussion around it. Australian consumer price index data.

This worked well as the market failed to breach the top of the channel twice, which also gave sellers two opportunities to take solid profits in the short term before the start of the month.

As previously mentioned, Australian CPI came in better than expected, but like previous releases, the Australian dollar is still falling, mostly due to a surprisingly weak PMI read from China to shift broad risk sentiment towards aversion during the session (likely It benefits the US dollar along the way).

This was a very big move during the week, so congratulations if you were able to take a risk with this strategy and pick up those pips!

Euro / Japanese Yen: Wed – 31 May 2023

The EUR/JPY broke out of a major chart pattern on Wednesday, supported by a mix of general risk-off sentiment and yen strength. Possibly the move was prompted by weaker-than-expected Chinese PMI data and an unscheduled meeting between Japanese finance officials which worried the markets a bit. We thought the setup could attract more sellers, especially if the Eurozone CPI came in below expectations.

Well, not only were the Eurozone CPI data weaker, but the Eurozone PMI data also indicated persistent deflationary conditions, potentially attracting some additional euro selling pressure from news algae and fund traders.

This downward trend was short-lived as broad risk sentiment shifted on Wednesday, arguably growing optimism that the US will avoid a debt default scenario, possibly in reaction to speeches from Federal Reserve members on Wednesday, suggesting the Fed may skip a rate hike. interest at the next June meeting.

From the time of publication to the broad shift in risk sentiment, EUR/JPY has managed to drop nearly 100 pips; Congratulations if you were able to get quick points during the day during this move.

Australian Dollar / Japanese Yen: Thursday – June 1, 2023

On Thursday, we returned to AUD/JPY, which broke lower as we had hoped and reached the minimum target on Tuesday around 90.78. The sellers actually took the pair as low as 90.27 before the buyers rallied, taking the pair above the session’s S1 pivot area and the 38% Fibonacci retracement area of ​​that downward swing from 92.05 to 90.24.

At the time of publication, we thought a bearish MA might attract technical sellers eyeing the potential new direction lower, but recognized the risk of a higher bounce due to the upbeat Chinese Caixin Manufacturing PMI data released earlier in the session, and the US. Debt deal optimism, lower odds of a Fed rate hike in June.

We saw a brief attempt by the AUD/JPY bears to hold the Fibonacci retracements and moving averages, but the new shift to a risk environment proved to be too much, resulting in a bullish breakout of that technical territory. So this strategy didn’t work for the bears, but if you used strong risk management practices it should have had a small success among some strong strategies this week.