Market expectations that a resolution to the budget impasse will soon be reached, and the United States will avert the looming fiscal cliff, has risk confidence supporting demand for the Canadian dollar over the Australian currency. Staggered though the price activity is for the currency pair, as both are high-yielding currencies, the Loonie is looked forward to benefit more over the Aussie on growth concerns in the Land Down Under.
Economists and analysts alike are pricing in an early Santa rally into the yearend. Art Cashin, Director of Floor Operations at UBS says that, "it shows you all the market cares about is they not go over the cliff. But it's pretty clear, we're not getting a grand bargain here." Cashin said the market expects at least some partial deal to head off the fiscal cliff debacle. Strategists said the stock market rally could continue into year end, unless Washington somehow blows up the negotiations and triggers an instant flight from risk assets. With the proximity of the Maple Leaf to the US, and considering the trade relationship between the two nations, the Loonie stands to gain from progress in the Santa rally.
Further, data from Statistics Canada today is forecast to show improvements in the Northern economy. Wholesale Sales for the month of October is estimated to have rebounded 0.4 percent, after a drop of 1.4 percent in September. A stronger rate of change is perceived to assist the Canadian currency’s advances.
On the other side of the coin, the Asian ComDoll is on a decline for a third day on concern that the South Pacific nation’s economy is slowing and could be in store for more interest-rate cuts by the Reserve Bank of Australia. An interview published in the Australian Financial Review has RBA Governor Glenn Stevens saying that a seamless “handover” from mining to other drivers of economic growth could not be absolutely guaranteed.
Considering these fundamental news, a sell position is suggested for the AUDCAD. Be mindful though of probable technical price corrections.
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