CADCHF Analysis (July 5th, 2024): Drop Before Rise Possible

As we enter a news day with employment data coming out for Canada, CADCHF looks ready for a  potential move with technical targets to the upside and downside.

Market Analyst
Jul 5, 2024

In a few hours time at 12:30 UTC, the Canadian Employment Change and Unemployment Rate data will be released, which could catalyse a move on CADCHF to the upside or downside.

The pair is currently trading at a resistance zone with the 4H ADX slowing down, suggesting a pause in bullish momentum and potentially peaking. Technically, this makes the “Drop before a rise” scenario more probable on the CADCHF pair.

Fundamentally though, if the employment change data is higher than anticipated, we could see a rise in CADCHF after what essentially has been a consolidation for the entire week.

Technical Analysis on CADCHF (July 5th, 2024)

On the 4H timeframe, the CADCHF pair is currently trading in an area where prices previously consolidated in April and May. Having moved into this zone from a lower price, it now acts as a resistance. The 4H ADX is also around 50, a level that CADCHF has tested and subsequently fallen from in the past.

If a rejection occurs, I would target the point of control at 0.65133 Francs. The absence of significant trading volume before this area suggests that a drop could be swift and smooth. From there, I would expect the POC to provide a bullish reaction, potentially giving CADCHF the strength to climb back up.

Alternatively, if CADCHF simply breaks the resistance zone, we could keep an eye on the significant area of approximately 0.66800. However, a push up from here may be challenging, as the Volume Profile shows there was moderate trading volume above the current area of 0.66040.

About the News Release

Ultimately, the CADCHF pair has been stagnant throughout the entire week, seemingly awaiting the employment data release.

Employment Change26.7K27.3K
Unemployment Rate6.2%6.3%

Source: ForexFactory

Bullish Scenario for CADCHF:

If the data for Employment Change comes in higher than expected, it indicates a strong labor market, which is generally positive for the Canadian Dollar (CAD).

If the Unemployment Rate is lower than expected, it also signals a strong labor market, further supporting the Canadian Dollar.

Combined, this could then fuel CADCHF to continue its upward momentum. However, the technicals currently do not provide me with the confidence to take a long trade at the resistance zone.

Bearish Scenario for CADCHF:

In the event that Employment Change comes in lower, and Unemployment Rate comes in higher, the fundamentals and technicals would align for a short position, bringing us down to potentially the consolidation zone of 0.65300 – 0.65000 Francs.

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Disclaimer: For educational purposes only. Trading comes with substantial risk, leading to possible loss of your capital. Traders are advised to do their own due diligence before investing.