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AUD CAD - FUNDAMENTAL DRIVERSAUD FUNDAMENTAL BIAS: WEAK BULLISH 1. Monetary Policy At their March meeting, the bank didn’t do much to surprise markets and stuck to a similar script compared to the previous meeting, with the exception of adding the Russia/Ukraine war as a major new source of uncertainty. While Unemployment is at 4.2% and expected to be below 4% throughout 2023, and with Inflation above the middle of the target range and expected to rise to 3.25 this year and stay at 2.75% throughout 2023, the continues dovish façade is getting a little embarrassing for the bank. Even though wage growth failed to surprise higher, consensus still expects it to reach 3% in Q2 and well above 3% in Q3, and once the 3% level is reached the RBA would have complete ran out of reasons to stay dovish. It’s clear that markets are looking straight through this though as STIR markets, bond yields and the AUD failed to see any real downside after the meeting and continued higher after a very brief and small dip lower. For now, the bank stays dovish, but the longer they stay in denial the longer the chances of a more aggressive hawkish pivot later. 2. Idiosyncratic Drivers & Intermarket Analysis Apart from the RBA, there are 4 drivers we’re watching for the med-term outlook: Recovery – unlike other nations where growth & inflation is expected to slow, Australia is expected to see a solid post-covid recovery China – With the PBoC stepping up stimulus & expectations of further fiscal support expected in 1H22, the projected recovery in China bodes well for Australia as China makes up close to 40% of Australian exports. However, the AUKUS defence pact could see retaliation against Aussie goods and is worth keeping on the radar. Commodities – Iron Ore (24% of exports) and Coal (18% of exports) keep grinding higher for various reasons, one being China’s expected recovery and the other the energy and inflation concerns given the geopolitical risks, and as long as these commodities are supported, they should continue to support the AUD. 3. Global Risk Outlook As a high-beta currency, the AUD usually benefits from overall positive risk sentiment as well as environments that benefit pro-cyclical assets. Thus, both short-term (immediate) and med-term (underlying) risk sentiment will always be a key consideration for the AUD. 4. CFTC Analysis The bag holders finally reacted! For weeks now we’ve been very surprised by the reluctance of big net-short positions for the AUD among market participants. Given all the recent positive developments for the AUD we would have expected a bigger unwind to take place much sooner. However, with a mammoth reduction of 30K net-short contracts for both large specs and leveraged funds it’s safe to say the unwind has begun. The more this reduces though the less our potent the upside for the AUD might be so just keep that in mind. 5. The Week Ahead The week ahead will be extremely quiet on the data from for the AUD. Which means the overall focus will fall to China, commodities and risk sentiment. The announcements from the CCP last week saw immediate support for Chinese equities and also boosted Aussie commodity prices and supported the AUD. Thus, any continued good news from China is a key catalyst to watch for the antipodean. This is closely linked to commodities as well, where Australia’s key commodity exports Iron Ore, LNG and Coal have remained well supported, and any news or developments that keep them supported or cause them to drop will be very important for the AUD. As always risk sentiment remains a focus for the AUD, where any major developments between Russia and Ukraine can have an impact, but commodities have been the dominant driver for the AUD in recent weeks so the sensitivity to pure risk flows has been less intense than usual. Our preferred way of expressing expected strength for the AUD is versus the CAD (check out recent trade ideas for information on why). CAD FUNDAMENTAL BIAS: NEUTRAL 1. Monetary Policy The BoC did not surprise at their March meeting by hiking rates to 0.50% from 0.25% and continuing the reinvestment phase regarding asset purchases. The bank noted that the Russia/Ukraine war was a new major uncertainty for the economy and that as a result inflation is now expected to be higher in the near-term. They were optimistic about the growth outlook though and reiterated that it expects further interest rate rises will be needed. On the QT side, Gov Macklem noted that around 40% of the bank's bond holdings were due to mature within two years, and suggested that balance sheet could shrink quickly, and also added that they will discuss ending the reinvestment phase and starting QT at the April meeting. The Governor also said he didn’t rule out the potential for 50bsp rate rises as oil is putting upside pressure on oil, noting that oil prices around $110 per barrel could add another percentage point to inflation. With markets implying close to another 5 hikes this year, we remain cautious on the currency as a slowing US and Canadian economy means the bank should struggle to maintain it’s current hawkish path in the weeks and months ahead. 2. Intermarket Analysis Considerations Oil’s massive post-covid recovery has been impressive, driven by various factors such as supply & demand (OPEC’s production cuts), strong global demand recovery, and of course ‘higher for longer’ than expected inflation. The geopolitical crisis the world is facing right now have opened up a big push higher in WTI, trading at levels last seen since 2008 last week. With oil prices at these levels the risk to demand destruction and stagflation is higher than ever and means we remain cautious oil in the med-term. Reason for that view is: Synchronised policy tightening from DM central banks targeting demand, slowing growth and inflation, a consensus that is very long oil (growing calls for $100 WTI), very steep backwardation futures curve which usually sees negative forward returns, heightened implied volatility. However, recent geopolitical risks have been a key focus point for oil and means escalation and de-escalation will be important to watch. 3. Global Risk Outlook As a high-beta currency, the CAD usually benefits from overall positive risk sentiment as well as environments that benefit pro-cyclical assets. Thus, both short-term (immediate) and med-term (underlying) risk sentiment will always be a key consideration for the CAD. 4. CFTC Analysis We think the recent price action and positioning data has seen the CAD take a very similar path compared to April and Oct 2021 where markets were way too aggressive and optimistic to price in upside for the CAD, only to then see majority of it unwind. However, oil prices remain in focus as a key intermarket driver, albeit the correlation has been very hit and miss over recent weeks. 5. The Week Ahead The data schedule is feather light for the CAD this week. We continue to remain cautious on the CAD anddespite continued calls for a roaring economy we do not share the optimism. The recent jobs print, even though it was positive at face value, was not that impressive when incorporating the Omicron-related drop. Furthermore, even though inflation were higher than expected, it wasn’t the type of upside scare we’ve seen in other economies like the US, UK and EU. If expectations for a slowdown in the US and Canadian economies are correct, it increases the probability that the BoC will need to turn dovish in coming weeks and months and means we continue to look for upside in the AUDCAD on a med-term basis, but in the short-term we are cautious of some corrective price action after the one-sided upside we saw last week so just keep that in mind.
by thunderpips
5
AUD CAD - FUNDAMENTAL DRIVERSAUD FUNDAMENTAL BIAS: WEAK BULLISH 1. Monetary Policy At their March meeting, the bank didn’t do much to surprise markets and stuck to a similar script compared to the previous meeting, with the exception of adding the Russia/Ukraine war as a major new source of uncertainty. While Unemployment is at 4.2% and expected to be below 4% throughout 2023, and with Inflation above the middle of the target range and expected to rise to 3.25 this year and stay at 2.75% throughout 2023, the continues dovish façade is getting a little embarrassing for the bank. Even though wage growth failed to surprise higher, consensus still expects it to reach 3% in Q2 and well above 3% in Q3, and once the 3% level is reached the RBA would have complete ran out of reasons to stay dovish. It’s clear that markets are looking straight through this though as STIR markets, bond yields and the AUD failed to see any real downside after the meeting and continued higher after a very brief and small dip lower. For now, the bank stays dovish, but the longer they stay in denial the longer the chances of a more aggressive hawkish pivot later. 2. Idiosyncratic Drivers & Intermarket Analysis Apart from the RBA, there are 4 drivers we’re watching for the med-term outlook: Recovery – unlike other nations where growth & inflation is expected to slow, Australia is expected to see a solid post-covid recovery China – With the PBoC stepping up stimulus & expectations of further fiscal support expected in 1H22, the projected recovery in China bodes well for Australia as China makes up close to 40% of Australian exports. However, the AUKUS defence pact could see retaliation against Aussie goods and is worth keeping on the radar. Commodities – Iron Ore (24% of exports) and Coal (18% of exports) keep grinding higher for various reasons, one being China’s expected recovery and the other the energy and inflation concerns given the geopolitical risks, and as long as these commodities are supported, they should remain supported. 3. Global Risk Outlook As a high-beta currency, the AUD usually benefits from overall positive risk sentiment as well as environments that benefit pro-cyclical assets. Thus, both short-term (immediate) and med-term (underlying) risk sentiment will always be a key consideration for the AUD. 4. CFTC Analysis CFTC positioning data for the AUD was interesting with large spec seeing almost no change (remember we anticipated a lot more unwind in this week’s data), while leverage funds saw a hefty increase in net-shorts and asset managers a hefty reduction in shorts. The only thin common among all three is that we are still in net-short territory, which despite frothy upside in the AUD, can still see upside, but price action is stretched right now. 5. The Week Ahead Right now, we think the Australian economy is well-placed compared to its peers as its economy is expected to recover alongside that of China (after going through a slowdown in 2021) just as other major economies are expected to slow. Even though markets have been pricing in a steep rate path for the RBA, we still think the large net-short positioning means lots of catch-up potential for the AUD. Even though recent wage data printed below target, market consensus still looks for 3% in Q2 and 3.5% by Q3, which means as long as inflation stays high (no expectation for that to slow as yet) and the labour market remains tight, the RBA should be next in line to tilt more hawkish, with a hike in rates very likely by the middle of the year. That means this week’s upcoming labour data will be important, where a good print will further solidify ideas of a policy pivot. The other intraweek focus is of course geopolitics, where the AUD has been well isolated from equity sell offs as key commodities like Iron Ore, Coal and LNG keep rising. However, with the amount of upside we’ve seen in a very short space of time we do need to be mindful of some possible mean reversion at some stage in the short-term. Counter-intuitively, if de-escalation news between Russia & Ukraine sees downside for commodity prices that would be expected to create a risk-on environment, which would usually be positive for the AUD, but it could end up weighing on the AUD if commodities drop, so we need view AUD through a commodity lens not just a risk sentiment lens. The other point to watch in the week ahead is the covid situation in China, which over the weekend saw China placing 17.5 million residents in Shenzhen under lockdown. At the same time there is also further speculation about more stimulus from the PBoC which could counter some of the negatives, but a risk worth keeping in mind. CAD FUNDAMENTAL BIAS: NEUTRAL 1. Monetary Policy The BoC did not surprise at their March meeting by hiking rates to 0.50% from 0.25% and continuing the reinvestment phase regarding asset purchases. The bank noted that the Russia/Ukraine war was a new major uncertainty for the economy and that as a result inflation is now expected to be higher in the near-term. They were optimistic about the growth outlook though and reiterated that it expects further interest rate rises will be needed. On the QT side, Gov Macklem noted that around 40% of the bank's bond holdings were due to mature within two years, and suggested that balance sheet could shrink quickly, and also added that they will discuss ending the reinvestment phase and starting QT at the April meeting. The Governor also said he didn’t rule out the potential for 50bsp rate rises as oil is putting upside pressure on oil , noting that oil prices around $110 per barrel could add another percentage point to inflation . With markets implying close to another 5 hikes this year, we remain cautious on the currency as a slowing US and Canadian economy means the bank should struggle to maintain it’s current hawkish path in the weeks and months ahead. 2. Intermarket Analysis Considerations Oil’s massive post-covid recovery has been impressive, driven by various factors such as supply & demand (OPEC’s production cuts), strong global demand recovery, and of course ‘higher for longer’ than expected inflation . The geopolitical crisis the world is facing right now have opened up a big push higher in WTI, trading at levels last seen since 2008 last week. With oil prices at these levels the risk to demand destruction and stagflation is higher than ever and means we remain cautious oil in the med-term . Reason for that view is: Synchronised policy tightening from DM central banks targeting demand, slowing growth and inflation , a consensus that is very long oil (growing calls for $100 WTI), very steep backwardation futures curve which usually sees negative forward returns, heightened implied volatility . However, recent geopolitical risks have been a key focus point for oil and means escalation and de-escalation will be important to watch. 3. Global Risk Outlook As a high-beta currency, the CAD usually benefits from overall positive risk sentiment as well as environments that benefit pro-cyclical assets. Thus, both short-term (immediate) and med-term (underlying) risk sentiment will always be a key consideration for the CAD. 4. CFTC Analysis We think the recent price action and positioning data has seen the CAD take a very similar path compared to April and Oct 2021 where markets were way too aggressive and optimistic to price in upside for the CAD, only to then see majority of it unwind. However, oil prices remain in focus as a key intermarket driver. 5. The Week Ahead Markets might once more be getting too bullish on the CAD at the wrong time. The CAD, which has not really been benefiting from the big rise in energy prices, saw quite a jolt higher on Friday after the recent jobs report. At face value it was a good print, but under the hood it there was some negatives. Firstly, even though the headline printed above max expectations, the bulk of the gains were part-time jobs. Furthermore, if we account for last month’s contraction, full-time employment only grew by 40K. This week the calendar has CPI data, where another surprise upside print is expected by some to see an even more hawkish BoC . However, with over 6 hikes once again embedded and priced in STIR markets, and with WTI prices started to show some signs of a slowdown in bullish momentum, the odds are arguably tilted towards a more dovish as opposed to more hawkish BoC in the months ahead. However, the short-term could see further strength in the case of a beat, but we will use any additional upside in the CAD to look for selling opportunities.
by thunderpips
2
💡Don't miss the great buy opportunity in AUDCADTrading suggestion: ". There is a possibility of temporary retracement to the suggested support line (0.9235). . if so, traders can set orders based on Price Action and expect to reach short-term targets." Technical analysis: . AUDCAD is in an uptrend, and the continuation of the uptrend is expected. . The price is above the 21-Day WEMA, which acts as a dynamic support. . The RSI is at 73. Take Profits: TP1= @ 0.9282 TP2= @ 0.9303 TP3= @ 0.9321 TP4= @ 0.9346 TP5= @ 0.9376 SL= Break below S2 ❤️ If you find this helpful and want more FREE forecasts in TradingView . . . . . Please show your support back, . . . . . . . . Hit the 👍 LIKE button, . . . . . . . . . . Drop some feedback below in the comment! ❤️ Your support is very much 🙏 appreciated!❤️ 💎 Want us to help you become a better Forex / Crypto trader? Now, It's your turn! Be sure to leave a comment; let us know how you see this opportunity and forecast. Trade well, ❤️ ForecastCity English Support Team ❤️
Long
by ForecastCity_World
8
💡Don't miss the great buy opportunity in AUDCADTrading suggestion: ". There is a possibility of temporary retracement to the suggested support line (0.9235). . if so, traders can set orders based on Price Action and expect to reach short-term targets." Technical analysis: . AUDCAD is in an uptrend, and the continuation of the uptrend is expected. . The price is above the 21-Day WEMA, which acts as a dynamic support. . The RSI is at 72. Take Profits: TP1= @ 0.9282 TP2= @ 0.9303 TP3= @ 0.9321 TP4= @ 0.9346 TP5= @ 0.9376 SL= Break below S2 ❤️ If you find this helpful and want more FREE forecasts in TradingView . . . . . Please show your support back, . . . . . . . . Hit the 👍 LIKE button, . . . . . . . . . . Drop some feedback below in the comment! ❤️ Your support is very much 🙏 appreciated! ❤️ 💎 Want us to help you become a better Forex / Crypto trader ? Now, It's your turn ! Be sure to leave a comment; let us know how you see this opportunity and forecast. Trade well, ❤️ ForecastCity English Support Team ❤️
Long
by ForecastCity
5
AUDCAD H4: BEST Level Australian Dollar Canadian Dollar traded at 0.91929 this Monday February 28th, increasing 0.00100 or 0.11 percent since the previous trading session. Looking back, over the last four weeks, AUDCAD gained 2.43 percent. Over the last 12 months, its price fell by 6.40 percent. Looking ahead, we forecast Australian Dollar Canadian Dollar to be priced at 0.92068 by the end of this quarter and at 0.91755 in one year, according to Trading Economics global macro models projections and analysts expectations.
by ajaxpassport
AUD CAD - FUNDAMENTAL DRIVERSAUD FUNDAMENTAL BIAS: WEAK BULLISH 1. Monetary Policy At their Feb meeting the RBA delivered on expectations by announcing an end to QE purchases, and also upgrading inflation and employment forecasts. These were seen as hawkish developments, but the bank tried as hard as possible to still keep up a dovish impression by saying the ceasing of QE does not imply near-term rate increases and stating that it’s still too early to conclude that inflation is sustainably within the target band despite recent CPI prints. The bank maintained their view that the cash rate will not increase until inflation is sustainably within the 2%-3% target band. Now, call me crazy, but on that front, the bank’s projections forecast inflation to reach close to 3.25% this year and then see it returning to 2.75% during 2023, which surely implied ‘sustainable’ inflation. Comments from Gov Lowe the following day were slightly less dovish though by acknowledging that achievement of their inflation and employment goals are within reach. He also noted that even though it remains to be seen if rates will increase this year, there are clearly scenarios where the bank would be hiking this year (which was a step away from the tone and language used in the statement) but added that it’s still plausible that a first-rate hike is a year or more away. The February decision and tone could be summed up as an incremental step away from ultra-easy policy and means we have changed our Dovish stance for the bank to neutral. 2. Idiosyncratic Drivers & Intermarket Analysis Apart from the RBA, there are 4 drivers we’re watching for the med-term outlook: Recovery – unlike other nations where growth & inflation is expected to slow, Australia is expected to see a solid post-covid recovery China – With the PBoC stepping up stimulus & expectations of further fiscal support expected in 1H22, the projected recovery in China bodes well for Australia as China makes up close to 40% of Australian exports. However, the AUKUS defence pact could see retaliation against Aussie goods and is worth keeping on the radar. Commodities – Iron Ore (24% of exports) and Coal (18% of exports) keep grinding higher and if China’s recovery starts to build some momentum, they should remain supported. 3. Global Risk Outlook As a high-beta currency, the AUD usually benefits from overall positive risk sentiment as well as environments that benefit pro-cyclical assets. Thus, both short-term (immediate) and med-term (underlying) risk sentiment will always be a key consideration for the AUD. 4. CFTC Analysis Stretched positioning are usually a contrarian indicator and warning of potential squeezes. Thus, right now the AUD might be more sensitive to positive data or developments compared to negative ones as a lot of bad news has been priced in. 5. The Week Ahead Right now, we think the Australian economy is well-placed compared to its peers as its economic is expected to recover alongside that of China (after going through a slowdown) just as other major economies are expected to slow down. Even though markets have been pricing in a steep rate path for the RBA, we still think the large netshort positioning means lots of catch-up potential for the AUD when the RBA eventually turns hawkish. Even though last week’s wage index printed slightly below target, market consensus still looks for 3% in Q2 and 3.5% by Q3, which means as long as inflation stays high (no expectation for that to slow as yet) and the labour market remains tight and growth keeps on recovering, the RBA should be next in line to tilt more hawkish, with a hike in rates very likely by the middle of the year. Despite the geopolitical risks these past few weeks, the AUD has remained very resilient, a good sign for our med-term upside expectations. This week we have the RBA, and even though they are not expected to shift their tone drastically just yet, the market has largely ignored the dovish language recently, and we would expect them to do so in the week ahead as well. For the week ahead, we have preliminarily shifted our currency bias for the AUD from neutral to bullish, but keep in mind that the AUD has seen a few weeks of solid gains recently, which means seeing some reprieve lower should not be much of a surprise. However, we are looking for any decent moves lower in the AUD as opportunities to get back in on the long side. However, given the weekend’s news of additional sanctions, this upcoming week is set to be very risk sentiment driven so keep that in mind as well. CAD FUNDAMENTAL BIAS: NEUTRAL 1. Monetary Policy Despite STIR markets pricing in close to an 80% chance of a 25bsp hike, the BoC chose to leave rates unchanged at their Jan meeting. However, the bank removed its extraordinary forward guidance and said they now think the economic slack has been absorbed (previously expected to occur somewhere in the middle quarters of 2022). The bank also explained that they expect rates will need to rise based on the progress of inflation, and Gov Macklem explained their only reason for not hiking was uncertainty surrounding Omicron. The statement gave a clear signal that a March hike is on the table. Furthermore, on the balance sheet the bank delivered on expectations by noting they will likely exit the reinvestment phase as rates begin to rise. Even though 2022 inflation projections were upgraded, the bank also downgraded growth forecasts (which in our view remains a key reason why current STIR market expectations are not realistic). Thus, the meeting had both dovish and hawkish elements to it, and thus means we are still happy to hold to a neutral bias for the CAD. 2. Intermarket Analysis Considerations Oil’s massive post-covid recovery has been impressive, driven by various factors such as supply & demand (OPEC’s production cuts), strong global demand recovery, and of course ‘higher for longer’ than expected inflation. Even though Oil has traded to new 7-year highs, we think the current Russia/Ukraine tensions and recent tight capacity concerns are the biggest contributors to the upside. We maintain a view that thinks there is greater risks of med-term downside due to: Synchronised policy tightening from DM central banks targeting demand, slowing growth and inflation, lower inflation expectations (due to the Fed), a consensus that is very long oil (growing calls for $100 WTI), a very steep backwardation futures curve which usually sees negative forward returns, heightened implied volatility. However, recent geopolitical risks have been a key focus point for oil and means escalation and de-escalation will be important to watch. 3. Global Risk Outlook As a high-beta currency, the CAD usually benefits from overall positive risk sentiment as well as environments that benefit pro-cyclical assets. Thus, both short-term (immediate) and med-term (underlying) risk sentiment will always be a key consideration for the CAD. 4. CFTC Analysis We think the recent price action and positioning data has seen the CAD take a very similar path compared to April and Oct 2021 where markets were way too aggressive and optimistic to price in upside for the CAD, only to then see majority of it unwind. However, with almost 3 weeks of straight downside we do want to be mindful of the possibility of some short-term upside, especially if the weekend sanction news sees further Oil upside. 5. The Week Ahead Focus for the CAD is threefold this week with risk sentiment, Oil and the BoC in focus. On risk sentiment and Oil, it’s a mixed bag for the CAD. Even though the oil market’s initial reactions to escalation and de-escalation were as expected, we did see the impact fading this week as some focus returned to the possibility of an Iran nuclear agreement came back on scene. With risk sentiment, any further escalation is expected to be negative for risk sentiment (negative for the CAD) and any de-escalation is expected to be positive for risk sentiment (positive for the CAD). Just keep in mind that even though oil prices started to react less to geopolitical risks this past week doesn’t guarantee that it will continue to do so in the week ahead. However, if oil prices do react stronger to geopolitical risks that will make the CAD a tricky one to trade as oil and risk sentiment would move inverse to each other and mean the CAD could have both a push and pull effect on the CAD. For the BoC, the market continues to price in a 100% probability of a 25bsp hike this upcoming week. We think there is a real risk that the decision is poised to be a ‘dovish’ hike, as the bank will want to keep the hiking going due to inflation but would want to leave some optionality by recognizing the potential damage the recent border protests could pose for growth and consumer sentiment in general. There is also the Russia/Ukraine war which complicates things for central banks right now, and given that uncertainty it would make sense for the BoC to walk back some of the aggressive pricing embedded into STIR markets.
by thunderpips
5
AUDCAD Analysis - Bearish Bias on 4 HRWelcome back! Here's an analysis of this pair! **AUDCAD - listen to video analysis. We recommend that you keep this pair on your watchlist and enter when the entry criteria of your strategy is met. Please support this idea with a LIKE and COMMENT if you find it useful and Click "Follow" on our profile if you'd like these trade ideas delivered straight to your email in the future. Thanks for your continued support! Brian & Kenya Horton, BK Forex Academy
Short
by BKTradingAcademy
8
AUD CAD - FUNDAMENTAL DRIVERSAUD FUNDAMENTAL BIAS: NEUTRAL 1. Monetary Policy At their Feb meeting the RBA delivered on expectations by announcing an end to QE purchases, and also upgrading inflation and employment forecasts. These were seen as hawkish developments, but the bank tried as hard as possible to still keep up a dovish impression by saying the ceasing of QE does not imply near-term rate increases and stating that it’s still too early to conclude that inflation is sustainably within the target band despite recent CPI prints. The bank maintained their view that the cash rate will not increase until inflation is sustainably within the 2%-3% target band. Now, call me crazy, but on that front, the bank’s projections forecast inflation to reach close to 3.25% this year and then see it returning to 2.75% during 2023, which surely implied ‘sustainable’ inflation. Comments from Gov Lowe the following day were slightly less dovish though by acknowledging that achievement of their inflation and employment goals are within reach. He also noted that even though it remains to be seen if rates will increase this year, there are clearly scenarios where the bank would be hiking this year (which was a step away from the tone and language used in the statement) but added that it’s still plausible that a first-rate hike is a year or more away. The February decision and tone could be summed up as an incremental step away from ultra-easy policy and means we have changed our Dovish stance for the bank to neutral. 2. Idiosyncratic Drivers & Intermarket Analysis Apart from the RBA, there are 4 drivers we’re watching for the med-term outlook: Covid - so far, the RBA has been optimistic about the recovery, but incoming employment and inflation data will be crucial to see if that optimism is justified. China – Even with PBoC stepping up stimulus & fiscal support expected in 1H22, the Covid-Zero policy poses a risk to China’s expected 2022 recovery and incoming data will be important. Politically, the AUKUS defence pact could see retaliation against Australian goods and is worth keeping on the radar. Commodities – Iron Ore (24% of exports) and Coal (18% of exports) are important for terms of trade, and with both pushing higher on PBoC easing, it’s a positive for the AUD if they remain supported. Global growth – as a risk proxy, the health of the global economy is important, which means expected slowdown in growth and inflation globally needs monitoring, but if China’s recovery is solid the fall out could be limited for the AUD. 3. Global Risk Outlook As a high-beta currency, the AUD usually benefits from overall positive risk sentiment as well as environments that benefit pro-cyclical assets. Thus, both short-term (immediate) and med-term (underlying) risk sentiment will always be a key consideration for the AUD. 4. CFTC Analysis Stretched positioning are usually a contrarian indicator and warning of potential squeezes. Thus, right now the AUD might be more sensitive to positive data or developments compared to negative ones as a lot of bad news has been priced in. With the RBA out of the way risk sentiment should be a more prominent driver. 5. The Week Ahead In the week ahead our focus for the Aussie will turn to jobs data as well as risk sentiment. On the jobs side, consensus expects the Omicron scare to have negatively impacts job employment, with forecasts anticipating a contraction of -15K. According to Westpac, the expected drop should not be enough to change the Unemployment Rate as the Participation Rate is expected to contract as well, and on that front the investment bank says there is a risk that the Unemployment Rate sees a further push lower as a result of that. Another solid beat (if we get one) should further increase chances of a RBA pivot in the meetings ahead, while a miss in the data would be a good sentiment test, as we are expecting any drops in the AUD on a miss to offer buying opportunities. As far as markets are concerned, the most important data point we’ll get before the March policy meeting is the wage index coming up on the 23rd of February, which means even though employment data is important, there are bigger fish to fry on the data side. HOWEVER, after Friday’s warning from the US regarding an imminent Russia invasion of Ukraine, risk sentiment might be the bigger driver for the AUD next week, where any negative escalation should be negative for risk and add pressure on the AUD while any de-escalation should be risk positive, thus giving support. CAD FUNDAMENTAL BIAS: NEUTRAL 1. Monetary Policy Despite STIR markets pricing in close to an 80% chance of a 25bsp hike, the BoC chose to leave rates unchanged at their Jan meeting. However, the bank removed its extraordinary forward guidance and said they now think the economic slack has been absorbed (previously expected to occur somewhere in the middle quarters of 2022). The bank also explained that they expect rates will need to rise based on the progress of inflation, and Gov Macklem explained their only reason for not hiking was uncertainty surrounding Omicron. The statement gave a clear signal that a March hike is on the table. Furthermore, on the balance sheet the bank delivered on expectations by noting they will likely exit the reinvestment phase as rates begin to rise. Even though 2022 inflation projections were upgraded, the bank also downgraded growth forecasts (which in our view remains a key reason why current STIR market expectations are not realistic). Thus, the meeting had both dovish and hawkish elements to it, and thus means we are still happy to hold to a neutral bias for the CAD. 2. Intermarket Analysis Considerations Oil’s massive post-covid recovery has been impressive, driven by various factors such as supply & demand (OPEC’s production cuts), strong global demand recovery, and of course ‘higher for longer’ than expected inflation. Even though Oil has traded to new 7-year highs, we think the current Russia/Ukraine tensions and recent tight capacity concerns are the biggest contributors to the upside as our cautious view going into Q1 & Q2 remain intact. The drivers keeping us cautious are A hawkish DM central banks targeting demand, slowing growth and inflation, lower inflation expectations (due to the Fed), a consensus that is very long oil (growing callsfor $100 WTI). Friday’s geopolitical risks regarding Russia/Ukraine saw Oil prices jolting higher, and any escalation or de-escalation of those tensions will be an important driver for Oil in the week ahead. 3. Global Risk Outlook As a high-beta currency, the CAD usually benefits from overall positive risk sentiment as well as environments that benefit pro-cyclical assets. Thus, both short-term (immediate) and med-term (underlying) risk sentiment will always be a key consideration for the CAD. 4. CFTC Analysis We think the recent price action and positioning data has seen the CAD take a very similar path compared to April and Oct 2021 where markets were way too aggressive and optimistic to price in upside for the CAD, only to then see majority of it unwind. CAD could be setting up for a similar disappointment with money markets too aggressive on rate expectations for 2022, but oil prices remain a big supporting driver to keep in mind. 5. The Week Ahead Focus for the CAD is threefold this week with CPI, risk sentiment and Oil. For CPI, the BoC made it very clear in their Jan meeting that a March hike is on the way and STIR markets have priced in a 100% chance of a hike. Thus, a beat in the CPI should not change much for the BoC or STIR markets with more than 6 hikes priced in already. However, if we were to have a bigger-than-expected miss, that might not change much for the BoC who would want to look through one single data point, but it could be enough to see STIR markets price out some of the froth, which would weigh on CAD. On risk sentiment and Oil, it’s a mixed bag for the CAD. After Friday’s warning from the US regarding an imminent Russia invasion of Ukraine, risk sentiment is in focus for the CAD next week, where any negative escalation should be negative for risk and add pressure on the CAD while any de-escalation should be risk positive, thus giving support. On the oil front, the Friday invasion warnings saw Oil prices jolt higher as a Russian invasion poses serious concerns regarding energy supply for both oil and Natural Gas. Thus, risk sentiment and oil will create a messy environment for the CAD next week, as escalation should be risk negative (CAD negative) but also oil positive (CAD positive), and vice versa for any de-escalation. This makes for a very tricky environment for the CAD in the week ahead.
by thunderpips
2
AUD/CAD : REVERSAL HEAD & SHOULDER | LONG SETUP Hello Everyone, I hope you'll Appreciate our Price action Analysis ! Our strategy is based on Swing trading with price action Analysis and Advanced Fibos tools. Please support our page by hitting the LIKE 👍 button to this Idea and Follow us to get NEW ONE! Feel free to request any pair/instrument analysis or ask any questions in the comment section below. If you like this idea or have your own opinion about it, please write your own in the comment box . We will be glad for this. Have a Good Take Day_Profits !
Long
by DAY_PROFITS
AUD CAD - FUNDAMENTAL DRIVERSAUD FUNDAMENTAL BIAS: NEUTRAL 1. Monetary Policy At their Feb meeting the RBA delivered on expectations by announcing an end to QE purchases, and also upgrading inflation and employment forecasts. These were seen as hawkish developments, but the bank tried as hard as possible to still keep up a dovish impression by saying the ceasing of QE does not imply near-term rate increases and stating that it’s still too early to conclude that inflation is sustainably within the target band despite recent CPI prints. The bank maintained their view that the cash rate will not increase until inflation is sustainably within the 2%-3% target band. Now, call me crazy, but on that front, the bank’s projections forecast inflation to reach close to 3.25% this year and then see it returning to 2.75% during 2023, which surely implied ‘sustainable’ inflation. Comments from Gov Lowe the following day were slightly less dovish though by acknowledging that achievement of their inflation and employment goals are within reach. He also noted that even though it remains to be seen if rates will increase this year, there are clearly scenarios where the bank would be hiking this year (which was a step away from the tone and language used in the statement) but added that it’s still plausible that a first-rate hike is a year or more away. The February decision and tone could be summed up as an incremental step away from ultra-easy policy and means we have changed our Dovish stance for the bank to neutral. 2. Idiosyncratic Drivers & Intermarket Analysis Apart from the RBA, there are 4 drivers we’re watching for the med-term outlook: Covid - so far, the RBA has been optimistic about the recovery, but incoming employment and inflation data will be crucial to see if that optimism is justified. China – Even with PBoC stepping up stimulus & fiscal support expected in 1H22, the Covid-Zero policy poses a risk to China’s expected 2022 recovery and incoming data will be important. Politically, the AUKUS defence pact could see retaliation against Australian goods and is worth keeping on the radar. Commodities – Iron Ore (24% of exports) and Coal (18% of exports) are important for terms of trade, and with both pushing higher on PBoC easing, it’s a positive for the AUD if they remain supported. Global growth – as a risk proxy, the health of the global economy is important, which means expected slowdown in growth and inflation globally needs monitoring, but if China’s recovery is solid the fall out could be limited for the AUD. 3. Global Risk Outlook As a high-beta currency, the AUD usually benefits from overall positive risk sentiment as well as environments that benefit pro-cyclical assets. Thus, both short-term (immediate) and med-term (underlying) risk sentiment will always be a key consideration for the AUD. 4. CFTC Analysis Stretched positioning are usually a contrarian indicator and warning of potential squeezes. Thus, right now the AUD might be more sensitive to positive data or developments compared to negative ones as a lot of bad news has been priced in. With the RBA out of the way risk sentiment should be a more prominent driver. 5. The Week Ahead With no major economic data points due for Australia next week the main focus will fall on RBA speak as well as risk sentiment. On the former, it will be interesting to see whether Gov Lowe is willing to share more details regarding their most recent decision as he seemed to be more optimistic during his speech compared to the overall tone of the policy statement. With the RBA finally starting to move away from dovish policy, it should open up more room for net-shorts to unwind, especially if Gov Lowe can sound more hawkish this week. However, the other factor to watch in the week ahead is risk sentiment. With US CPI in the mix, as well as bond markets crashing hard, credit spreads starting to widen and real yields pushing higher across major economies, the uncertainty is starting to pile on for risk assets which means caution on that front will be important for the AUD and the other high-betas in the week ahead. CAD FUNDAMENTAL BIAS: NEUTRAL 1. Monetary Policy Despite STIR markets pricing in close to an 80% chance of a 25bsp hike, the BoC chose to leave rates unchanged at their Jan meeting. However, the bank removed its extraordinary forward guidance and said they now think the economic slack has been absorbed (previously expected to occur somewhere in the middle quarters of 2022). The bank also explained that they expect rates will need to rise based on the progress of inflation , and Gov Macklem explained their only reason for not hiking was uncertainty surrounding Omicron. The statement gave a clear signal that a March hike is on the table. Furthermore, on the balance sheet the bank delivered on expectations by noting they will likely exit the reinvestment phase as rates begin to rise. Even though 2022 inflation projections were upgraded, the bank also downgraded growth forecasts (which in our view remains a key reason why current STIR market expectations are not realistic). Thus, the meeting had both dovish and hawkish elements to it, and thus means we are still happy to hold to a neutral bias for the CAD. 2. Intermarket Analysis Considerations Oil’s massive post-covid recovery has been impressive, driven by various factors such as supply & demand (OPEC’s production cuts), strong global demand recovery, and of course ‘higher for longer’ than expected inflation . Even though Oil has traded to new 7-year highs, we think the current Russia/Ukraine tensions and recent tight capacity concerns are the biggest contributors to the upside as our cautious view going into Q1 & Q2 remain intact. The drivers keeping us cautious are A hawkish Fed targeting demand, slowing growth and inflation , lower inflation expectations (due to the Fed), a possible supply surplus in 1Q22, and a consensus that is very long oil (growing calls for $100 WTI). If our concerns do materialize into downside for oil prices it should put pressure on the CAD and other Petro-currencies like the NOK . 3. Global Risk Outlook As a high-beta currency, the CAD usually benefits from overall positive risk sentiment as well as environments that benefit pro-cyclical assets. Thus, both short-term (immediate) and med-term (underlying) risk sentiment will always be a key consideration for the CAD. 4. CFTC Analysis We think the recent price action and positioning data has seen the CAD take a very similar path compared to April and Oct 2021 where markets were way too aggressive and optimistic to price in upside for the CAD only to see majority of it unwind. We think the CAD is setting up for a similar disappointment with money markets too aggressive on rate expectations for 2022, but oil prices remain a big supporting driver to keep in mind. 5. The Week Ahead A very quiet week for the CAD from an economic data point of view. We do have a speech coming up from Gov Macklem, but he is unlikely to offer anything new that we have not already heard. Thus, the biggest focus or drivers for the BoC in the week ahead will likely be Oil prices and overall risk sentiment. In terms of risk sentiment, with US CPI in the mix, as well as bond markets crashing hard, credit spreads starting to widen and real yields pushing higher across major economies, the uncertainty is starting to pile on for risk assets which means caution on that front will be important for the CAD and the other high betas in the week ahead. In terms of oil prices, the concerns of tighter capacity for major suppliers as well as bad weather and geopolitical stress has kept oil prices well buoyed in the short-term which should be a positive input for the Petro-currencies like the CAD and NOK . However, we remain neutral on the CAD and med-term concerned about oil from here which means we maintain our upside bias for the AUDCAD for now.
by thunderpips
3
AUDCAD made a bottom and is targeting the 1D MA200.Pattern: Bearish Megaphone on the 1D time-frame. Signal: Buy as the price hit the bottom (Lower Lows trend-line) of the Megaphone while the 1D MACD is about to print a Bullish Cross, which since August has signaled a rise. Target: The 1D MA200 with a rough projection at 0.9200. -------------------------------------------------------------------------------------------------------- ** Please support this idea with your likes and comments, it is the best way to keep it relevant and support me. ** --------------------------------------------------------------------------------------------------------
Long
by TradingShot
2
GBPAUD bearish momentum! | 26th Jan 2022Prices are on bearish momentum and abiding to a descending trendline. We see the potential for a dip from sell entry at 0.90309 in line with 23.6% Fibonacci retracement towards our Take Profit at 0.89759 in which is an area of Fibonacci confluences. Prices are trading below our ichimoku clouds, further supporting our bearish bias. Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary, and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interest arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed on the website.
Short
by Rockqet