CAD/CHF just broke above a strong resistance area, but flipped back to the downside after bad PMI data. Are sellers jumping back in on the reaction or will the bulls buy into this pullback?
Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on GBP/USD after risk sentiment shifts positive, so be sure to check that out to see if there is still a potential play!
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Fresh Market Headlines & Economic Data:
- U.S. job openings was little changed at 6.9M the last business day of February – U.S. Bureau of Labor Statistics
- Small-business confidence in US economy dropped in March: NFIB
- U.S. health officials say death toll may fall short of most dire projections
- Canada Ivey PMI drops to 26.0 in March vs. 54.1 In February
- German Industrial production +0.3% m/m in February ; -1.2% y/y
- In February 2020, French trade deficit reached a moving average of 5.5B euros, after 5.0B euros in January 2020
- UK House prices in March were 3.0% higher than in the same month a year earlier; +0.0% m/m
- UK PM Johnson ‘stable’ in intensive care, needed oxygen after COVID-19 symptoms worsened
- Swiss unemployment rate rose from 2.5% in February 2020 to 2.9% in March.
Upcoming Potential Catalysts on the Forex Calendar for U.S. & Asia:
- U.S. Consumer credit change at 7:00 pm GMT
- API Crude inventory at 8:30 pm GMT
- Japan Current account, Machinery orders at 11:50 pm GMT
- Australia Home loans at 1:30 am GMT (Apr. 8)
- Japan Eco Watchers survey at 5:00 am GMT (Apr. 8)
What to Watch: CAD/CHF
On the one hour chart above of CAD/CHF, forex traders seem to be holding the freshly broken resistance around 0.6900 – 0.6920 as a new support area. But the Loonie just took a small tumble after very bad PMI update from Canada to retest the strong area of interest and rising ‘lows’ pattern. Will the bulls hold the new support area or are bears ready to take back control? Well, the potential catalyst for the next move may come from oil prices, which could see some volatility later during the Asia session with the API crude oil inventory update.
For the bulls on the pair, a decrease in inventory would likely spark an oil rally, and potentially a rally in the Canadian dollar. If this scenario plays out, a break above the minor psychological level of 0.6950 is a setup to watch for some quick pips if there is strong momentum.
If the pair has pulled back ahead of the release and support has formed, consider a long play at those levels if inventory decreases. This trade also rolls along with the recent swing in risk sentiment towards positive, so the probability of profitability looks good as long as this environment holds.
For the bears on CAD/CHF, another inventory rise would likely spark some oil and Loonie selling, and if that scenario plays out, watch the rising trendline for a break. This is actually a tough position to argue for in this risk-on environment, so it makes sense to be extra cautious with a short position in CAD/CHF until broad risk sentiment shifts once again.