The Australian Canadian dollar cross is not normally one you hear about, but markets are certainly looking a little hard to read over the course of the last 24 hours, and this opportunity is hard to miss. Presently the Australian dollar has been descending against the Canadian dollar over the course of the past two months. This is expected to continue in the short term.
What’s particularly nice about this chart is how solid the downslopping channel is. It has now been tested twice, and both times markets have failed to find ground to crash through. The market will now be looking lower on the charts as a result.
With the recent comments from Australia, about continuing on a neutral stance when it comes to dealing with the current situation in Australia; and there repeated talking down of the Australian dollar it has for the most part fallen heavily on many charts. While their Canadian counterparts have so far struggled, recent Core CPI data y/y showed that Australian inflation was around 1.8% which is very close the 2% threshold that central banks aim for – so this was greeted positively by some in the markets as a good sign.
The situation in Canada has been a little heavy as of late, and growth has been a little sluggish as a result. But with the American economy next door starting to see signs of recovering, it certainly could only be a matter of time before this flows over the border to its Canadian neighbours.
The weekly charts also shows the stress appearing on the charts as the pair starts to converge in a pennant pattern, which will likely lead to a drop lower given the current Australian dollar weakness that is starting to appear on the charts over the last few weeks, and the inherent fundamentals which I have outlined.
Overall, the charts are certainly looking good when it comes to the AUDCAD pair, and markets will be looking to watch if shift lower as confidence in the Australian dollar dwindles over time and it heads towards the bottom of the current pennant pattern.
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