AUD/CAD Daily Outlook - June 6, 2013

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By: DailyForex.com

The AUD/CAD pair fell apart during the session on Wednesday, breaking well below the parity level. While most of you have been watching the AUD/USD or even the USD/CAD pairs, this one has quietly put in a nice technical sell signal. The Australian dollar in general looks fairly weak, and the fact that it is struggling against the Canadian dollar which hasn't been doing so hot itself is certainly a very negative sign.

This is a battle to commodity currencies, and it might show that gold is essentially weaker than oil considering the standard correlations. But I think he goes a little bit deeper than that, as gold is starting to find a bit of its own footing. I think this is more or less a sign of what's going on in Asia. After all, the Australians are what would be the equivalent of a "general store" for the Asians and their building materials. If economic activity is contracting in Asia as the most recent HSBC PMI numbers in China suggested, it is possible that there will be less demand for copper, iron, and gold out of that region. That being the case, the Canadians have the Americans to lean on to the south in order to sell their exports. This is something that the Australians don't have working in their vantage of the moment. This I believe is the correlation that's making this pair fall apart.

Parity was a big deal

The parity level was a big deal, and you can see that the clustering lasted for a couple of weeks. The fact that we broke down below that signals that we are going much lower in my opinion, perhaps as low as the 0.95 handle in the near-term. This coincides nicely with the selloff in the Australian dollar against the US dollar as well, and that only further room strengthened my resolve that this is an anti-Asia play, and a pro-North American one. That being the case, don't forget about this pair while everybody else focuses on the majors. This is without a doubt a nice way to play North American strength.

AUDCAD Daily

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.