AUD/CAD will likely see some action in the next session or two as the Reserve Bank of Australia will give its latest interest rate decision very soon.
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Fresh Market Headlines & Economic data:
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- ISM manufacturing PMI decreases to 51.7 from 52.1 in May
- OPEC set to extend oil production curbs by nine months
- Clarida Says Fed Will ‘Act as Appropriate’ to Sustain Expansion
- Manufacturing downturn deepens as UK PMI falls to lowest level since February 2013
- Annual growth in U.K. consumer credit continued to slow, falling to 5.6% in May
- Hammond warns PM contenders over post-Brexit spending promises
- Final Eurozone Manufacturing PMI at 47.6 in June (Flash: 47.8, May Final: 47.7)
- ECB can provide more stimulus, must stick to mandate: Lane
- EU Commission to delay decision on Italy debt: EU official
- Australia’s manufacturing sector finished off the second quarter on a stronger note, rising to 52.0 in June vs. 51.0 in May
- Caixin China Manufacturing PMI fell from 50.2 in May to 49.4 in June
- Japan big manufacturers’ mood hits near 3-year low – BOJ tankan
- The Japanese Consumer Confidence Index (seasonally adjusted series) in June 2019 was 38.7, down 0.7 points from the previous month
Upcoming Potential Catalysts on the Forex Calendar:
- New Zealand business confidence at 11:00 pm GMT
- New Zealand building permits at 11:45 pm GMT
- Reserve Bank of Australia Cash target rate at 5:30 am GMT (July 1)
- U.K. Nationwide house prices at 7:00 am GMT (July 1)
- Europe PPI at 10:00 am GMT (July 1)
What to Watch: AUD/CAD
Big time moves coming for the Aussie as we’ll get the latest interest rate decision from the Reserve Bank of Australia in the upcoming Asia session, with expectations of a 25 basis point cut to 1.00%. Of course, there are multiple scenarios that could play out, with the likely one being that the 0.25% cut was likely priced in well ahead of time so it’s possible that some profit taking could occur after the event if this occurs. If they hold off on a cut, a bounce is more likely to be the reaction, depending on the tone, and if they cut big, then a follow through sell off could be the market’s reaction. We’ll have to wait-and-see.
So, with multiple scenarios pointing to a bounce, that might be a good opportunity for the bears who to play the weakening economy & falling interest rate theme in Australia. And they could do it against the Canadian dollar, which has recently benefited from rising oil prices, a scenario that looks to stay for now as OPEC set to extend oil production curbs by nine months. That means the downtrend in AUD/CAD is likely to hold for the next few sessions, so a return to the minor resistance area on the one hour chart above (around 0.9200) could draw in the bears once again. Look out for that retest and reversal patterns to the downside if the RBA does cut, especially with a dovish outlook.
For the bulls, a hawkish hold is the only likely scenario to break AUD/CAD above the resistance area between 0.9200 – 0.9250, but another scenario to look at is if the pair moves to the previous swing low area just above 0.9100, look for bullish reversal patterns as the move may be limited and profit taking may occur for a bounce with the Loonie set to get Canada’s monthly employment numbers on Friday. Support at 0.9100 could be good for a bounce within the daily average true range of about 45 – 50 pips.