Sell AUD/CAD - ANZ
|Analysts at ANZ suggest that AUD/CAD has outperformed in recent weeks and in their view is now providing a tactical selling opportunity.
Key Quotes
“On a relative basis the CAD has significantly underperformed, with the cross rallying over 7% since January. This outperformance has not matched the relative economic realities. While in Australia the RBA has remained neutral in the face of continued weakness in the wages pulse, in Canada the central bank has remained dovish despite a significant improvement in the data.”
“The relative surprise indices bear this out, with the scale and duration of the improvement in Canada’s data (relative to expectation) becoming hard to ignore – an upgrade of economic prospects is immanent.”
“Further, the recent reversal in the iron ore price is signalling that its outperformance may be coming to an end. Indeed ANZ research is forecasting that the recent rally has run too far. Conversely, for oil markets we believe that the recent sell-off has run too far. Marginal production costs for shale in the US are starting to rise, while the seasonal inventory build is also likely to peak soon. As such, a reversal in the iron/ore to oil ratio also supports the trade.”
“We recommend selling AUD/CAD at 1.0180 with a target of 0.99. We will reassess above 1.04.”
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