I don't think it's any secret that the Australian dollar is on a tear right now, some recent macro data upside surprises and extreme hedge fund positioning have added to its strength. The Canadian dollar on the other hand is suffering, lower inflation and falling oil prices will see the Bank of Canada cut rates again this week.
This is why the AUD/CAD chart is very appealing, especially as now the price has broken out of a long term consolidation pattern.
AUD Strength Here to Stay?
The Aussie dollar has been the strongest performer in the G10 and was up 1.45% against the USD last week. It has also stormed through other stronger currencies like the GBP, CHF and EUR.
This move has been supported by the recent labour market data which has been holding up. Unemployment fell to 4.2% in July and expectations for August seem steady. The RBA is still cautious, but the jobs data gives them cover to cut rates slowly rather than aggressively as first thought.
CAD Woes
The Canadian dollar on the other hand is under pressure.
Weaker data prints including softer builder permits and lower inflation is a sign of slowing consumer demand.
Oil prices have also been coming down and steadying, with Canada being a large exporter of oil, profits could be much lower.
This week the Bank of Canada is forecast to cut interest rates for the first time since March of this year, lower interest rates often lead to currency depreciation.
AUD/CAD Long?
The price of AUD/CAD has broken out of a consolidation that formed back in May. This gives us a strong insight into the market's thoughts here, and upside potential is likely under the current circumstances. If the price is going to form a trend then a bullish opportunity might form on pullbacks into key support areas. The 0.9000 level could be that place. Targets for longs could reach as high as 0.9350 which is the 2024 high.