It was one other week of top tier events for forex traders to balance ideas around. Our forex strategy discussions had a mixed week as some fundamental triggers didn’t play out but we did see one solid setup in NZD/CHF.
Take a take a look at our reviews to see what happened and the way in which we did!
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On Tuesday, EUR/AUD rose to the best of the watchlist with potential motion ahead for the Australian dollar. The recent broad bullish move inside the euro took the pair to the best of a well defined range, which didn’t break over again, and quickly drew in technical sellers and/or profit taking, an assumption given there was lack of catalysts for the turn through the Tuesday session.
We then looked forward to the Australian CPI release, which odds favored a neutral-to-slight uptick final result, which could likely keep the “no cut” theme in play (and a potentially bullish AUD response). We noted that if that scenario played out, there was still room for EUR/AUD to maneuver lower, and discussed additional moves traders may take if it did.
Australian later came out lower than expected at 3.4% (3.6% forecast), further raising the possibilities of less hawkish rhetoric from the RBA, possibly even raising the potential for cuts sometime down the road if economic activity slows.
That final result immediately invalidated our fundamental trigger, and as expected with the result, the Aussie immediately went into bull mode for the remaining of the session, invalidating our range reversal scenario as well.
With that final result, our strategy discussion was highly likely not supportive of a positive final result as no short position should have been taken, thus not effective. But for those watching Australian CPI real time and adapted to the surprise final result by selling AUD, the possibilities of a positive final result should have been pretty good.
On Wednesday, finally got to one in all the highly anticipated FX events of the week: the RBNZ rate of interest decision. The market had been pricing in a potentially hawkish hold, with just a couple of traders even seeing small odds of a rate hike…what?!
Well, then it’s no surprise that the Kiwi dropped like rock on Wednesday after a somewhat neutral hold statement from the RBNZ. They held the OCR at 5.50% but stayed open to rate hikes if needed and pushed the potential for rate cuts to 2025.
After the drop, we made arguments that the longer-term uptrend could possibly attract buyers, especially if the broad risk sentiment environment shifted more positive (and/or anti-USD sentiment grew) around top tier U.S. data like GDP and the highly anticipated Core PCE Price Index update.
In any case, we also checked out the possible scenario where if broad risk sentiment continued to lean more negative (i.e., likely the outcomes of strong U.S. data), NZD/CHF could see more losses this week as traders price in higher odds rate cuts being pushed back.
NZD/CHF continued to drift lower after our discussion and eventually did stabilize across the S2 Pivot Support area. This behavior change also correlated with the latest U.S. GDP read for Q4 2023, which came in below expectations/previous at 3.2%.
Buyers really began to step on Thursday, correlating with the U.S. core PCE Price Index and weekly jobless claims data, which also raised anti-Dollar sentiment and risk-on vibes. The core PCE Price Index data was mixed between the monthly and annual reads, so its likely traders focused more on the weak initial jobless claims data, and possibly on the lower Personal income and expenditures data that was also released with core PCE data.
Whatever the case is also, NZD/CHF found a bid in the meanwhile, and as expected in our original discussion, traded higher with improving risk-on sentiment.
Arguably, this discussion was effective in potentially supporting a positive final result as our top of the range scenario of weak U.S. data prompting sentiment shifts in our favored bias played out, our goal support area held, and the resulting move did hit our first goal resistance area (S1 Pivot Support level).
On Thursday, we saw that hawkish comments from Japanese officials gave the yen a lift as traders priced in rising odds of a rate hike from the Bank of Japan this 12 months. This took yen pairs quickly to the downside this week, including the highly liquid EUR/JPY pair.
And with more top tier events yet to hit the markets, we thought intraday volatility would stay elevated on EUR/JPY, more prone to be supported by Euro area updates, including CPI reads from Germany, France and Spain inside the upcoming London trading session.
We thought that if Euro area updates came in weaker than expected, the intraday selloff in EUR/JPY could potentially attract additional sellers, so we discussed strategies there, each aggressive and conservative.
Euro area updates were soon released after our discussion, mostly coming in mixed but arguably net negative. Germany’s data showed weakness inside the Euro area’s largest economy while France posted net positive updates overall.
EUR/JPY rallied across the discharge, retesting the pivot area before sellers jumped back into the downtrend to take the pair into latest intraweek lows across the S1 Pivot Support area.
It was there where it looks similar to the market bumped right into a wall of buy orders on EUR/JPY as price rebounded quickly, possibly orders from longer-term fundie and technical players, and/or short-term players moving with the late risk-on shift around the important thing U.S. data releases.
Whatever the case is also, EUR/JPY traded above the Pivot Point by Friday trade, where it stabilized and traded sideways into the weekend.
This discussion was a difficult one to grade as the basic trigger of weak Euro area data didn’t really play out. But EUR/JPY did find short-term resistance after a pullback to 162.50, a scenario we did mentioned within the unique discussion, which preceded the drop to latest lows very briefly.
Overall, we’d rate this discussion as neutral towards supporting a potentially positive final result as the basic triggers were clear enough for a strong bias, the direction was right but short-lived, and it could have required very energetic risk/trade management to realize a positive final result.
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