Our forex strategists were feeling the Comdolls this week, specializing in major inflation updates from Australia and Canada.

Out of the 4 scenario/price outlook discussions this week, two discussions saw each fundie & technical arguments triggered to turn into a possible candidate for a risk management overlay.  Take a look at our review on that discussion to see what happened!

Watchlists are price outlook & strategy discussions supported by each fundamental & technical evaluation, an important step towards making a prime quality discretionary trade idea before working on a risk & trade management plan.

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EUR/CAD 1-Hour Forex Chart by TradingView

On Monday, our strategists started off with a have a look at the Canadian dollar, specializing in the upcoming Canadian CPI update because the catalyst for likely big moves on the Loonie.

In line with our Event Guide on the Canadian CPI release, expectations were for that the newest data would signal a proceed deceleration trend in inflation growth, supporting recent market speculation of the Bank of Canada cutting rates of interest in July.

If that event scenario played out, we were expecting an upside break of a descending triangle developing on USD/CAD for brief Loonie setups. Now, if the newest Canadian CPI surprised the markets with a warmer read, then we had the downtrend in EUR/CAD on the watchlist for a bullish Loonie play, a very good matchup given the recent weak PMI’s and political uncertainty from the euro area having the potential to maintain euro bears in play.

Well, the Canadian CPI update got here in hotter than expected as headline inflation accelerated from 2.7% year-on-year to 2.9% in May. This prompted a giant spike higher within the Loonie right off the jump, and with sustained traded below the 1.4650 minor psychological area, our short EUR/CAD fundamental and technical arguments were triggered in the method.

The spike was short-lived, though, retracing half of the move inside the first hour, and giving up a bit more because the week went on. This was likely more resulting from euro strength as ECB officials downplayed rate cut expectations this week than “buy the rumor, sell the news” behavior, given the broad move higher within the euro starting on Wednesday.

So, timing, risk and trade management were very big aspects on whether this discussion was supportive of a net positive final result. We mentioned that EUR/CAD could move higher ahead of the Canadian CPI event, which it did, and for many who shorted there after resistance formed, likely saw very positive results, especially if the took profit soon after the CPI release.

For individuals who short immediately after the event, odds are they might have seen a net negative final result, again, highly depending on the trade structure used. And for many who waited and shorted later within the week after the bounce, odds are those risk managers saw a small net positive final result.

Overall, with the markets reacting as expected after the event, but choppy price motion and euro strength forming, we’d argue that this discussion was likely “neutral to net negative” in supporting a possible positive final result.

EUR/AUD 1-Hour Forex Chart by TradingViewp

On Tuesday, the Aussie rose to the highest of the watchlist as the newest CPI update from Australia was right across the corner. Our Event Guide for the Australia CPI update showed that the newest data pointed to an final result showing inflation remaining “sticky” high in May.

If that was the final result to be, our strategists were watching the downtrend in EUR/AUD for a possible long Aussie play, once more, resulting from the recent weak PMI’s within the Euro area more likely to keep rate cut speculation afloat for the euro.

Within the scenario where Australian CPI data showed disinflation (likely reducing the chances of the RBA keeping rates elevated), then we turned to the AUD/USD pair for brief Aussie setups, given the present outlook that the Fed may have to do less rate cuts in 2024 than previously thought.

Well, the massive day for the Aussie got here and as expected, inflation data showed not only a sticky high inflation environment within the Land Down Under, but prices grew at a faster pace than expected at 4.0% — a six month high!

This obviously supports likely hawkish rhetoric ahead for the Reserve Bank of Australia, so it was no surprise that the Aussie spiked higher against all major currencies, and sure why AUD closed as one of the best performer this week amongst the main currencies.

And in EUR/AUD specifically, the pair spiked lower on the initial release, after which drew in additional sellers in the next five hours before finding support just above the S1 Pivot support level, and as broad euro strength began to develop.

That euro strength was enough to take the pair back to pre-Australian CPI event levels and the weekly Pivot Point area, which apparently was a powerful selling area as traders pushed the pair back down quickly on Friday, possibly on a shift back to monetary policy / rate of interest divergence between the RBA and ECB before the weekly close.

So very like EUR/CAD above, with choppy price motion following the event, risk and trade management would have been a consider determining whether or not this discussion was supportive of a positive final result. Provided that there was time to short after the event and grab that full move down, in addition to one other opportunity to short on the pivot point after the euro rally, we’d argue that this discussion was “neutral to likely” being supportive of a net positive final result. 

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