AUDCAD Weekly Poised for Breakout in Coming Weeks
AUDCAD Weekly – AUDCAD has been trading within a triangle since the beginning of the year and as we approach the end of summer, traders will be hoping that an increase in volatility will see a break of this triangle.
The Aussie Dollar has been one of the strongest currencies this year but the levels it has reached in recent weeks are considered to be overvalued. Despite this, option pricing is showing that the Australian Dollar could extend its rally during this weekend’s Jackson Hole symposium. The Reserve Bank of Australia have also mentioned that a strong currency will hurt the economy and that they are watching the AUDUSD rate closely but traders seem to have shrugged this off. A report on Bloomberg also suggested that the only way the RBA can control AUD strength is through a rate cut, meaning that their warnings will have little to no impact. The US Dollar has also helped to strengthen the Aussie Dollar, with the chances of a December rate hike by the Fed being lowered to around 40%. This will play a major part in how the Australian Dollar moves against other major currencies until the end of the year as the RBA cash rate is currently only 25 basis points higher than the Federal Reserve’s cash rate. A move by either central bank to equalise these rates will have quite an impact on the macro fundamental picture for the Australian Dollar.
Meanwhile, there are also positives for the Canadian Dollar bulls. The Bank of Canada hiked rates for the first time in 7 years last month and a 70% chance of a rate hike has been priced in by the market for October. Along with this, the commodity correlated currency can be pleased with the recent stability in the oil market. However, traders should not get carried away until we see stronger fundamental indications for another rate hike from the BoC and through data points.
Based on the current lack of fundamental stimulus in the summer markets, we are neutral on this pair. However, we will be patiently awaiting the release of both central bank’s statements in just over one week for indications of changes in their respective monetary policies. On the technical side, we would only look to buy if there was a break of the 1.0400 level, with a target of 1.0800. On the other hand, a bearish break of the triangle, would allow us to consider a sell position with a target of 0.9200.
The Aussie Dollar has been one of the strongest currencies this year but the levels it has reached in recent weeks are considered to be overvalued. Despite this, option pricing is showing that the Australian Dollar could extend its rally during this weekend’s Jackson Hole symposium. The Reserve Bank of Australia have also mentioned that a strong currency will hurt the economy and that they are watching the AUDUSD rate closely but traders seem to have shrugged this off. A report on Bloomberg also suggested that the only way the RBA can control AUD strength is through a rate cut, meaning that their warnings will have little to no impact. The US Dollar has also helped to strengthen the Aussie Dollar, with the chances of a December rate hike by the Fed being lowered to around 40%. This will play a major part in how the Australian Dollar moves against other major currencies until the end of the year as the RBA cash rate is currently only 25 basis points higher than the Federal Reserve’s cash rate. A move by either central bank to equalise these rates will have quite an impact on the macro fundamental picture for the Australian Dollar.
Meanwhile, there are also positives for the Canadian Dollar bulls. The Bank of Canada hiked rates for the first time in 7 years last month and a 70% chance of a rate hike has been priced in by the market for October. Along with this, the commodity correlated currency can be pleased with the recent stability in the oil market. However, traders should not get carried away until we see stronger fundamental indications for another rate hike from the BoC and through data points.
Based on the current lack of fundamental stimulus in the summer markets, we are neutral on this pair. However, we will be patiently awaiting the release of both central bank’s statements in just over one week for indications of changes in their respective monetary policies. On the technical side, we would only look to buy if there was a break of the 1.0400 level, with a target of 1.0800. On the other hand, a bearish break of the triangle, would allow us to consider a sell position with a target of 0.9200.