Big week for the comdolls with top tier economic events ahead, as well as geopolitical issues spooking traders early in the week. Here are bullish/bearish technical setups for the Loonie, as well as a look at AUD/NZD.
At the end of the week, the Loonie is set to be a potentially big market mover with the latest Ivey PMI data on Thursday and the Canadian employment update on Friday. For those thinking these could be bullish for the Loonie, we think EUR/CAD is forming a strong technical argument for Loonie bulls to take advantage of what is likely to be a quiet week for the euro (no major events for Europe on the economic calendar).
On the four our chart above of EUR/CAD, we can see the pair bouncing higher in favor of the euro, likely on the recent risk-off sentiment driving the markets as the U.S.-China trade war escalates. The market is now testing the Fibonacci retracement area of the recent swing move lower from 1.5150 to 1.4600, and with stochastics signalinig potentially over bought conditions, it’s time to look out for resistance/reversal patterns to play the longer-term downtrend around the 1.4800 – 1.4950.
For those who are Loonie bears on the upcoming Canadian data, CAD/CHF may be the pair for you as it is not only a great technical setup, but it is inline with the current risk-off environment as the Swiss franc tends to rally during times of market uncertainty.
From a price action perspective, the market is retesting major support area around 0.7375 -0.7400 that brought in bullish reversals over the past few months. If that area is broken on some weak Canadian economic updates, the coast is clear for the bears to take control, and given the 50 pip daily ATR, a 100 pip move is not out of the question with top tier economic event and geopolitical certainty in play.
Besides the top tier economic events from Canada, we’ll get the latest monetary policy decisions from both the Reserve Bank of New Zealand and the Reserve Bank of Australia this week. We’ll also get New Zealand’s quarterly employment update, so it should be a rockin’ week for those two currencies, especially with all the drama going on between China and the U.S.
The cleanest setup we could find was on AUD/NZD, a pair that has been in a textbook grind lower since peaking back in April around 1.0700. We can see on the four hour chart above that the pair has developed a channeling pattern lower, with the market now testing the bottom of the channel ahead of the major economic & policy events.
For the bears, a retest of the top of the descending channel is likely the highest probability setup for selling success, which also lines up with a strong resistance area around 1.0450 marked on the chart above.
For the bulls, the pair may already be ready for rally higher with stochastic showing oversold conditions as it nearly tests the bottom of the channel. If you’re aggressive, longing in this area is a viable entry strategy if you can keep your stop tight, but for the more conservative, if the economic data/geopolitical updates push the pair to the top of the channel breaks it, a break-n-retest setup around 1.0450 should shoot up to the top of the watchlist for a live play.