- The AUD/CAD has fallen a bit during the trading session on Thursday as we continue to see quite a bit of noisy behavior in this market.
- Lately, we have bounced around between the 0.91 level on the bottom, and the 0.93 level on the top.
- Keep in mind that both of these currencies are commodity currencies, so there is going to be a certain amount of push/pull in the market right now as commodities in general are very messy.
Earlier in the day, the ADP numbers in the United States came out much hotter than anticipated, so the Federal Reserve is expected to remain very tight. The question at this point is going to be what commodity suffers the most? Remember, the Australian dollar is thought of as a proxy for not only gold, but other metals such as copper and iron. In other words, Australia is highly dependent on the rest of the world needing hard materials, most specifically China. Australia is suffering at the hands of the Chinese slowdown and all the noise when it comes to the coronavirus issues there, as the Chinese economy has put up some rather dire numbers as of late.
Eyes are on the Canadian Dollar
On the other side of this equation, we have the Canadian dollar. The Canadian dollar of course is highly levered to the crude oil market, which looks anemic at best. However, the Canadians have something that the Australians do not have, and that’s the United States. The United States is still in a very high growth mindset, and therefore Canada will benefit from this as they are the largest trading partner of the United States and tend to supply the US with a lot of “stuff.”
That being said, you should keep in mind that the crude oil market can drag on the Canadian dollar, so while it may strengthen against the Australian dollar, I would not necessarily look for the Canadian dollar to suddenly get overly aggressive against other currencies, especially the US dollar as crude oil demand is something that a lot of people are worried about right now. Nonetheless, Canada is still in a better economic place than Australia is, so if we can break down below the 0.9050 level, I think this will confirm a double top and the market should go much lower. On the other hand, we could just continue to trade in this well-defined range.
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