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Another rate hike, another chance to buy AUD?

AUD/CAD is testing the upper limits of a Double Bottom pattern!

Before moving on, ICYMI, yesterday’s watchlist checked out AUD/JPY’s short-term downtrend inside a longer-term uptrend. Be sure to check out if it’s still a valid play!

And now for the headlines that rocked the markets in the last trading sessions:

Fresh Market Headlines & Economic Data:

Major earthquake hits Turkey, Syria

Japan’s nominal wages jumped 4.8% y/y, the fastest since 1997, but real wages dropped by 0.9% y/y and registered its first drop in two years

Japan’s household spending fell 1.3% y/y vs. 0.3% dip expected in December

As expected, RBA raised interest rates by 25 bps to 3.35% in February

RBA: “further increases in interest rates will be needed over the months ahead”

BRC: retail sales decelerated from 6.5% in December to 3.9% y/y in January as Christmas cheer subsided

Japan’s Ministry of Finance confirms “stealth” forex interventions in October

Australia’s trade surplus dipped from 13.47B AUD to a four-month low of 12.23B AUD in December as easing supply chain issues boosted imports and rising costs weighed exports

Oil rises on China outlook, supply worries after Turkey earthquake

Dollar pauses in bullish run; Aussie climbs on RBA’s hawkish outlook

Halifax: UK house prices rose by 1.9%y/y in January, the slowest increase since October 2019, due to squeeze in household income

Switzerland’s jobless rate edged up from 2.1% to 2.2% in January

Germany’s industrial output dropped by 3.1% m/m in December vs. 0.7% expected

Energy imports helped double France’s trade deficit in 2022

Upcoming Potential Catalysts on the Forex Economic Calendar:

US and Canada’s trade balance data at 1:30 pm GMT
BOE MPC member Cunliffe to give a speech at 3:30 pm GMT
Powell’s to speak at the Economic Club of Washington at 5:00 pm GMT
BOC Gov. Macklem to give a speech at 5:30 pm GMT
POTUS Biden’s State of the Nation address at 2:00 am GMT (Feb 8)

Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! 🔥 🗺️

What to Watch: AUD/CAD

AUD/CAD 1-hour Forex Chart by TradingView

A few hours ago the Reserve Bank of Australia (RBA) raised its interest rates by an expected 25 bps to 3.35%.

What traders didn’t expect was for RBA members to talk about further increases over the next few months. Naturally, AUD gained pips across the board at the news.

Expectations of higher interest rates were enough to send AUD/CAD back to its .9300 previous highs and form a possible Double Bottom pattern on the 1-hour time frame.

Are we looking at an upside breakout in the making?

Keep in mind that traders are also pricing in optimism over China’s economic recovery today.

On the other hand, Canada is set to print its trade balance report during the U.S. session while Bank of Canada (BOC) Governor Macklem will take center stage at 5:30 pm GMT.

If markets focus on RBA’s hawkish bias and China’s recovery prospects, then AUD/CAD could bust above its .9300 highs and maybe retest inflection points like .9370 or .9400.

But if today’s Canadian data and speech events turn the spotlight on CAD, then AUD/CAD could dip from its current levels and form a range instead.

What do you think?