It seems that the events of last week with the euro related pairs and the US dollar, in general, were not an isolated occurrence. We only need look at the economic events planned for release this week to see that we might have the same kind of volatility, if not even more.
We recommend traders take the first half of this week to note the commodity currencies, as news from Australia and Canada are hitting the wires. This means that trading CAD and AUD pairs should bring plenty of volatility and excitement.
In Australia, the CPI (inflation) is to be released, and while markets are looking for 0.4% when compared with 0.5% previously, but this is still highly unpredictable, but of course, this depends on the release. A softer release should bring a lower AUD and a better than expected one should bring a squeeze higher for AUD related pairs.
On the other hand, last Friday saw the Canadian inflation being released in line with expectations and as a result, the USDCAD did nothing more than hold their daily ranges. However, next week brings the all-important interest rate decision in Canada, and BOC (Bank of Canada) will set the monetary policy for the next period.
Traders should not simply focus on the interest rate, but also consider the tone used in the press conference. Either way, if the CAD pairs move, we expect quite a bearish assessment.
This may come as a surprise because the last jobs data in Canada showed an economy that had added an impressive number of jobs in the previous month. The recent US data is showing resilience in the US economy, and this should transfer to Canada as the two countries share many similarities.
We would still say the path of least resistance should be a lower CAD against the USD and AUD. If we were to have a target in mind for the two pairs, then we predict parity for AUDCAD and the USDCAD may reach 1.14 before the weekend.
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Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
