The present threat atmosphere and a candy technical setup brings AUD/CAD again to the highest of our longer-term watchlist. Is the current rally accomplished and able to reverse?
AUD/CAD has been on our watchlist for a bit, going again to early February when it bottomed out across the 0.8900 deal with. We mentioned that the world between the sturdy space of curiosity (round .9100) as much as the falling trendline is the world to look at for a possible alternative to play the longer-term downtrend at higher costs, and it appears to be like just like the market is lastly there after a pair extra weeks of Aussie power.
On the each day chart above, the market has mainly retested the falling ‘highs’ sample and is presently within the strategy of forming a Night star sample (a triple candlestick sample the typically precedes a bearish reversal). This will attract technical merchants into the longer-term downtrend because the potential risk-to-reward is way more favorable at these ranges.
Utilizing a decent cease above the falling trendline/earlier swing excessive and focusing on the earlier swing low offers a possible return vary of round 1.50:1 or extra. And that is probably attainable in month or so with the suitable atmosphere.
Wanting ahead, we do have main catalysts that might preserve volatility excessive for AUD/CAD, most notably the Reserve Financial institution of Australia and Financial institution of Canada’s newest financial coverage determination subsequent week, adopted by Canadian inflation and Australian employment the week after.
So, the state of affairs we’re watching out earlier than contemplating a brief on AUD/CAD is the place the RBA pushes again on a number of price hikes as soon as once more, and if the BOC offers us greater than a 25 bps hike and/or raises expectations of an accelerated price hike schedule.
This state of affairs coupled with the continued rise in oil costs offers one of the best odds of the Loonie out performing the Aussie over the following month, and this commerce of two risk-on currencies in opposition to one another shields us a bit from the present volatility induced by the Russian invasion of Ukraine. Not a foul play.
However what do y’all suppose? Will Loonie bulls take again the reins on AUD/CAD? Will we see any surprises from the central banks subsequent week? Please tell us in our remark part under!
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