AUDCAD Short Bearish gets strongerAustralia's ties to China and the 'hard' commodities it produces have fostered a historical relationship between the local currency and precious metals. The value of the Canadian Dollar is strongly correlated with the price of crude oil as the country remains a dominant exporter of the commodity. Both currencies are therefore sensitive to broader commodity price trends.
AUD has been hurt by a mix of factors recently: a setback in risk sentiment amid the lack of meaningful progress in Washington over raising the debt limit, a trimming back of rate cut expectations after hawkish speak from US Federal Reserve officials, and underwhelming Australia data (jobs data being the most recent).
This puts increased focus on Australia retail sales data for April due Friday – forecast to have slowed to 0.1% on-month from 0.4% previously.A below-expected print could precipitate a decline in AUD. Also, a higher-than-expected US core PCE price index print (expected to remain flat at 4.6% on-year) could boost USD.
AUD/CAD’s fall below a horizontal trendline from April at about 0.8950 has triggered a minor double top (the April and the May highs), potentially exposing downside risks toward 0.8800. The bearish development follows a failure to cross above stiff resistance on the 89-day moving average (see the daily chart).
