AUD/CAD: RBA Minutes Push Demand for the Loonie

The medium-term bullish run by the AUD/CAD is deemed to have lost its momentum as fears over the state of global finances resurface. The Canadian dollar stands to gain over its fellow ComDoll today, fueling a bearish retracement that could likely lead USD/CAD price activity to surpass the 50.0 level of the bearish Fibonacci Retracement channel.

Earlier today, minutes from the recently concluded policy meeting by the Reserve Bank of Australia showed that the central bank saw the strength of the domestic dollar as well as slowing growth in China as risks to the domestic economy. According to the minutes, and as reported on Bloomberg, “While borrowing costs were unchanged for a third straight meeting, the minutes signaled policy makers were monitoring weaker commodity prices and a global economy still ‘subject to significant downside risks.’ In its assessment of the domestic outlook, RBA officials discussed signs that labor demand had softened ‘a little further,’ housing showed some improvement while a higher currency was taking a toll.”

“Members discussed the possibility that the high level of the exchange rate was weighing more heavily on the economy than might be expected,” the minutes showed. “Overall, despite the ongoing structural change, the unemployment rate had remained relatively low to date.”

In the minutes, the RBA policy makers said that recent data on China’s growth were “a touch weaker, and this had been accompanied by a sharp decline in spot prices for iron ore and coking coal,” -- two of Australia’s biggest commodity exports. If sustained, the declines would mean a larger fall in the terms of trade than the RBA had previously forecast, the minutes showed.

With the Australian economy on a moderate pace as per the outlook presented in the minutes of the RBA meeting, and with the acknowledgement of a weakening global economy, this news is likely to drag on the Aussie currency and benefit the Loonie in turn. There are no economic releases on the docket for Canada today, thereby demand for the commodity currency is perceived to be drawn by crude oil prices and developments in its primary trading partner, the United States.

A short position is recommended for the AUD/CAD, though still be wary of probable technical price corrections.

For more news, analysis, technical charts and candlestick analysis, visit AlgosysFx Forex Trading Solutions

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