FX Watchlist: AUD/CAD Downtrend Bounce Forward?

We’ve received financial coverage statements from each the Reserve Financial institution of Australia and the Financial institution of Canada this week, making AUD/CAD one of many prime pairs to look at for a pickup in volatility.

What may we anticipate from each central banks and can that be sufficient to maintain the downtrend going or change the market’s bias?

AUD/CAD Downtrend Bounce Forward?

AUD/CAD 4-Hour Forex Chart
AUD/CAD 4-Hour Foreign exchange Chart

We last looked at AUD/CAD back at the end of October, seeing a excessive likelihood state of affairs the place one other resistance space retest just below 0.9400 would attract sellers as soon as once more and resume the downtrend. It appears like that state of affairs has come to move, and since then, AUD/CAD has been a gradual downtrend, now testing the world across the main psychological degree of 0.9000.

This week, we could get the catalysts which will decide upcoming value motion for AUD/CAD for the following month, or on the very least, for the following week or two. We’ll get the newest financial coverage statements from each the Reserve Financial institution of Australia and Financial institution of Canada this week, and according to my friend Pip Diddy, it appears like each central banks are more likely to maintain charges this month.

What may spark volatility, although, is any commentary on the Omicron variant scenario and the way probably it’s going to affect their development/inflation outlooks. Additionally, for the BOC, oil value expectations and commentary on Canada’s scorching job market might be factors of curiosity for merchants.

Total, we predict each central banks will sign warning this week, so with Canada’s latest scorching jobs number and oil costs nonetheless comparatively excessive regardless of the latest dip, the Loonie could proceed to outperform the Aussie within the medium-to-long time period if we don’t get any surprises from both central financial institution. Worse case for these seeking to play the downtrend is that some revenue taking could happen to push costs larger within the short-term.

If volatility picks up this week and brings AUD/CAD again as much as the damaged  assist areas and falling ‘highs’ sample, then we’ll look out for the state of affairs above to probably play a short position if we see bearish reversal patterns kind in that space and stochastic indicators overbought circumstances.

After all, if we see any shock adjustments to coverage or outlook, then that plan goes straight out the window and we’ll must reassess the market’s response and the info after the occasions. However for now, the development appears to nonetheless be our good friend for the time being.

What do you all suppose? Will AUD/CAD give sellers one other shot to play the development at higher costs? Or is that this the short-term backside on the main psychological?  Let me know within the feedback part under!

This content material is strictly for informational functions solely and doesn’t represent as funding recommendation. Buying and selling any monetary market includes threat. Please learn our Risk Disclosure to ensure you perceive the dangers concerned.

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