Aussie and Loonie in the Spotlight

Monday, Jun 4, 2012

With tonight’s RBA Rate Statement already discounted to reflect a 25 basis point cut and tomorrow’s Rate Statement from what has been a hawkish BOC, how will these two currencies fair against a U.S. dollar that has been correcting lower today.

The upcoming RBA rate decision is already forecasted at 3.50% and this represents another 25 basis point cut in addition to the 50 basis point cut from the prior meeting. Since that meeting the Australian dollar has actually stabilized but what can be seen on the AUD/USD is a U.S. dollar that has been climbing on a flight safety into the greenback.

The greenback (and yen’s) strength has been the story for May and it remains to be seen if it can continue into June with QE expectations growing from a whisper to a roar and the USD/JPY still sinking on a strong yen and a vigilant BOJ ready to sell yen as they did to - the tune of 14.3 trillion yen - last year.

With two central bank decisions coming, both the USD/CAD and AUD/USD have strong trends behind them; the former a bullish the Directional Bias and the latter a bearish one. Corrections in either market could set up a trending following swing entry.

Past performance is not indicative of future results

The Fed’s printing press seems to have not outdone the demand for the greenback as a slowdown in China and the continued saga in Europe play out. The recent U.S. equities downturn has only fueled the fire for dollar assets.

 

Past performance is not indicative of future results

The USD/CAD reflects the strong dollar but the upcoming Rate Statement meeting will reveal if the Carney and the Bank of Canada are still as hawkish; Canada is still expected to be the first G7 country to raise rates but the data must support this posture otherwise Carney will have no solid footing to hike rates and the loonie which has remained resilient despite a crude oil market in the low 80’s will begin to weaken.

 

Past performance is not indicative of future results

 The aussie gained on the greenback today on a greenback correction lower but the trend is still down for the aussie as higher yielding currencies are not in demand in this fear-driven environment. There is no arguing how aggressive the RBA has been already and therefore the 25 basis point cut is highly expected but baked into the cake so a cut alone will likely not drive the aussie lower, that will depend on how dovish the tone of the statement is.

 

Past performance is not indicative of future results

The USD/CAD 240-minute chart looks the most attractive for a trend following swing buy if prices can correct lower to 1.0360 to 1.0350

 

As an active forex trader and Chief Currency Analyst for InterbankFX.com I do write for a number of sites all over the web and I am happy to say that I will be posting updates at www.IBFXconnect.com. My Activity Board will feature the trades from my trading account as well as intraday commentary.

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Posted By: 

Raghee Horner

Raghee Horner, chief currency analyst for IBFX, provides her personal daily trading tips and insights through Dailyforextradingedge.com. An experienced trader with over fifteen years in the markets, Raghee is the co-founder of EZ2Trade Software and has taught her brand of technical analysis and charting strategies to students all over the world. She is an international author and has taught currencies, futures, and equities trading for over a decade.