Technical Outlook: AUD/CAD

Fundamental Outlook (AUD/CAD)

Rating agency Moody's cut the outlook for Australian banks to negative citing sluggish profit growth due to slow wage increases, record-low interest rates, strong lending competition and rising household debt. This follows Standard and Poor's which also placed a negative outlook on the banks in July. The AUD saw immediate pressure on the news, as did the NZD as New Zealand banks are owned by Australian financial institutions.

In today’s session, we expect the strongest currency to be CAD as the continued rally in the oil market keeps the currency well supported.

The weakest currency is expected to be AUD after rating agency Moody's places a negative outlook to Australia's major banks which prompted immediate weakness in the currency. Growth concern for China is also a factor as home price rises in the country's largest cities are showing signs of easing, adding to fears that one of the key economic drivers is cooling.

There is no tier one data for today's London session. The main risk to an AUDCAD trade during London is a decline in oil prices. Later during NY we will see the CA CPI and Retail Sales figures.

The AUDCAD pair is currently priced at 0.9780.

There are several levels including the current price level which can be considered for selling opportunities:

The price levels below could be used to sell from as price retraces into them:

0.9810, 0.9826, 0.9841

Source: Jarratt Davis

Technical Outlook (AUD/CAD) Weekly Chart)

Summary: The price has been rather bearish in the past two weeks, portraying two strong bearish candles. With the short term bearish and bullish fundamentals of AUD and CAD respectively, in addition to a technical uptrend breakdown, I am expecting the price to continue moving down to the critical support zone.