Our FX strategies had an incredibly effective week with four directional biases and technical setups playing out generally as discussed. Check it out!
Forex Setup of the Week: Simple USD/CAD Range Play Ahead of BOC Decision
USD/CAD 4-Hour Forex Chart by TV
On Monday, we spotted this textbook range setup on USD/CAD, that could quickly see volatility ahead with two major events from Canada this week.
We didn’t take a strong directional lean, but we did discuss both bullish and bearish price scenarios to watch out for based on the outcome of the upcoming Bank of Canada monetary and interest rate policy statement.
Well, it looks like Loonie bulls dominated thanks to a surprise rate hike from the Bank of Canada on Wednesday, continuing the downside move from the range top that started in May.
Our bearish scenario discussed was of a downside support break, which didn’t play out, but there was definitely opportunity to catch some pips on the move, both after our post and after the Bank of Canada event.
CAD/JPY: Tuesday – June 5, 2023
CAD/JPY Daily Forex Chart by TV
On Tuesday, we decided to throw CAD/JPY on the watchlist as it pulled back from a strong rally to start the month of June.
We had a bullish lean because from a charting standpoint, there were plenty of arguments to draw in technical buyers, including a retest of a price area that included Fibonaccis, a broken swing high and rising 100/200 simple moving averages (roughly between 103.00 – 103.65).
The catalyst for a potential return to the rally was the upcoming Ivey PMI data and the Bank of Canada interest rate decision, with the latter likely having the biggest probability of sending the Loonie higher with the possibility of a rate hike.
Well, it looks like technical and fundamental traders were coming before the BOC event, holding the strong area of interest note above around 103.50, and with the surprise rate hike from BOC, the pair took off to nearly retest the 105.00 handle by mid-week before settling around current prices around 104.50 ahead of the week close.
AUD/CHF: Tuesday – June , 2023
AUD/CHF 1-Hour Forex Chart by TV
On Tuesday, we spotted a short-term setup on AUD/CHF, eyeing a potential long setup if the pair gave back some immediate gains sparked by the Reserve Bank of Australia announcing an interest rate hike earlier in the session.
On the 15-min chart, we spotted a pattern/setup that could potentially draw in technical traders (retest of a consolidation area around 0.6000 – 0.6010, as well as fundie traders looking to play the RBA event at a better price.
We also believe that another bullish move could be ahead with fresh catalysts from a scheduled speech by RBA Governor Lowe, as well as an upcoming GDP read from Australia. Hawkish comments from Lowe and/or a better-than-expected GDP read may keep traders on the bull side this week.
Well, it looks like we hit the direction and turning point pretty well, but our timing was off as stayed mostly sideways, likely due to Aussie traders balancing hawkish RBA events and net negative economic updates from Australia this week.
But AUD/CHF did finally pull back on Thursday and hit our discussed support area on Friday, where the market caught a bid and moved quickly higher, likely riding the broad market risk-on vibes into the weekend.
NZD/CAD: Wednesday – June , 2023
NZD/CAD 2-hour Forex Chart by TV
Wednesday was the big day for Loonie traders with the Bank of Canada set to give their latest monetary policy decision, and we thought the descending triangle pattern on NZD/CAD was a solid setup to watch in case we saw a bullish move on the session.
Aside from the text book consolidation-break setup on the 1-hour chart, with the RBNZ hinting of pausing ahead, it made sense for fundamental players to keep an eye on the pair for a bearish move if the BOC came out with at least a “hawkish hold” tone.
Well, they did more than that as mentioned earlier, hiking interest rates by another 25 bps to 4.75% and surprising most of the market (we actually thought this scenario was a real possibility in our Event Guide). A
And as discussed in our Event Guide, this scenario sparked a very bullish reaction from traders to lift the Loonie to the top spot on the session against the FX majors, including NZD/CAD.
Not only did we see the support area of the triangle quickly broken, but NZD/CAD moved more than one daily ATR to the downside, giving NZD/CAD bears a chance to grab quick pips on this solid technical & fundamental setup.
Unfortunately for those looking for an extended swing move, NZD/CAD reversed course as Kiwi broadly recovered (likely on positive Chinese banking news) while CAD broadly fell with oil prices on Thursday.
AUD/CAD: Thursday – June 8, 2023
AUD/CAD 2-Hour Forex Chart by TV
On Thursday, we saw that AUD/CAD had dropped like a rock after the BOC surprise rate hike, taking the pair to the bottom of a rising channel and the 100/200 simple moving averages.
We thought that bulls may take back control after news hit the wires that Chinese banks lowered their deposit rates, which could potentially drive capital back into the local and global economy and spur growth. And given that the Aussie often trades in correlation to Chinese news/data, we thought that this could lift up AUD/CAD as well.
From a price action standpoint, there were several arguments to potentially draw in technical buyers. This was mainly the area where SMA’s, Fibonacci retracement and the rising ‘lows’ pattern/channel bottom converged.
And it looks like that’s how AUD/CAD played out as it quickly found a bid and returned to the top of the rising channel, again, with the help of positive Chinese news, but also likely on the broad Loonie weakness mentioned above and arguably broad risk sentiment shifting positive ahead of the weekend.
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