Australia and Canada are set to release top-tier economic reads this week, making AUD/CAD a solid pair to watch for potential short-term trading opportunities.
AUD/CAD may get set to jump around this week with top-tier events from both the Land Down Under and the Great White North.
In just a few hours, Australia is set to release their latest CPI read (forecasted to come in at 7.6% y/y vs. 7.4% y/y previous), and this could really get the pair moving as it would likely have a significant influence on the RBA’s interest rate expectations.
A higher print seems to be priced in at the moment, so if it comes in as expected or below the previous read, that could draw in Aussie profit takers or sellers in the short term. A much higher print, though, could potentially push the Aussie higher, so that’s a potential scenario to be aware of as well.
The market seems to be consolidating at the moment, likely waiting for the Australian CPI read, making a straddle / news trade type setup to consider for very short-term traders out there.
There are also potential plays for longer-term players out there as more volatility is likely ahead with catalysts from Canada. On Friday, we’ll get the latest monthly read on Canada’s GDP, expected to come in at 0.3% m/m vs. -0.1% m/m previous.
The Loonie seems to be finding strength so far this week as well, and if it continues to rally into the read on Friday, this could also be a potential profit-taking scenario for the bulls if the number comes in at or below expectations.
Whatever the outcomes of the two events may be, we’re on the lookout for the market to potentially set up a chance to play the bigger theme for AUD/CAD: the monetary policy divergence between the Reserve Bank of Australia and the Bank of Canada.
In their latest meeting minutes, the RBA said they may pause hiking interest rates (currently at 3.60%) at their next meeting, while the BOC has already paused their rate hike campaign at 4.50% at their last monetary policy statement.
If the upcoming CPI and retail sales data (next week) from Australia support a rate hike pause, then this may draw in AUD/CAD sellers looking to play the BOC’s interest rate differential advantage.
In that scenario, a move higher and retest of the .9160 – .9200 area is one to watch for bearish reversal patterns for swing traders looking to play that particular fundamental narrative on AUD/CAD.
At those prices, there’s also a solid potential return-on-risk setup if using a break of the swing highs as a stop argument and the recent swing lows as a short-term target.
What do you think? Is AUD/CAD on your watchlist for either a day trade setup or a swing trade? Let us know in the comments below!
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