AUDCAD Market Outlook 25 Jan

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It does not get tighter than two commodity currencies pitted against one another at a time of unstable equity markets worldwide, excess volatility in commodity prices coupled with diverging monetary policy across different parts of the world.

With commodities cancelling each other out with an across the board washout in commodities and a slackening pace of growth in the high demand regions of the world, the AUD/CAD presents a case study in a race to the bottom.

The only differentiators that may make one of these currencies to pip the other are : the interest rate cycle and the exact breakdown of exports by major trading partner countries.

In terms of the interest rate differential, the RBA seems to be winning the face off with the BOC holding interest rates at next to 0 levels.

In terms of the trading partner mix, the high growth regions certainly form a bigger share of the export markets of the AUD. However, a turning cycle, with a slowdown down the road in the high growth regions, coupled with a gradual pickup in the more mature economies, may mean that the CAD may catch up down the line.

For now however, it seems that the AUD is on a path of taking out some major levels against the CAD, and this could well be exacerbated, should interest rates not being rising anytime soon in the North American/West European region.

Technicals

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On the H4 technical chart, AUDCAD is below SMA50 and SMA200. The Stochastic is signaling downward momentum. But on the daily chart, price is still above of the 50 day and 200 day moving averages and 50 day moving average is working as immediate support currently. So market is mixed right now as Daily is not in line with H4. Bearish momentum might prevail, if price can break through the 0.9800 level. Conversely if price climbs up above 1.0081, we might see the continuation of bullish trend in AUDCAD.

Trade Suggestion:

Sell below .9780 with a Stop Loss above .9940 and Take Profit @.9720. Buy above 1.0100 with a Stop Loss @0.9980 and Take Profit @1.0190.

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