The sudden rise in interest rates in Canada prompted traders to sell AUD/CAD yesterday!
In case you missed it, the Bank of Canada (BOC) raised interest rates by 25 basis points to 4.75% after holding them at 4.50% for three consecutive decisions.
AUD/CAD, which had been consolidating near 0.980, fell to the psychological 0.900 area before enough AUD buyers stepped in.
Australian dollar / canadian dollar forex for one hour Planned by TV
What makes yesterday’s bearish pullback interesting is that it stopped at an ascending resistance channel that has been in place all month.
Not only that, but the .8900 also lines up with the 61.8% Fibonacci retracement of this week’s rally, the resistance area of last week, and the 100 SMA on the one hour time frame.
Are we seeing a reversal from a broader uptrend?
Asian session traders say that Chinese banks have cut interest rates based on the “requests” of the authorities.
The unexpected stimulus helped lift the Australian dollar against some of its peers, and optimism may gain traction in the upcoming trading sessions.
I will be keeping an eye on Chinese CPI data tonight to see if the Australian dollar’s rally continues.
Markets see producer prices falling another 4.3% yoy (from -3.6%) in May while CPI may come in at 0.2% yoy from April’s 0.1% reading.
A lower-than-expected CPI will support interest rate cuts in Chinese banks and may encourage a risk-friendly trading environment.
AUD/CAD could jump back to the previous highs of 0.980 if not the key psychological level of 0.9000.
If Chinese price indicators confirm the disappointing growth after the close, the Australian dollar could continue to fall against the Canadian dollar.
At the moment, I am on the upside finding the green candles and aiming for the previous highs.
What about you? Are you thinking of buying AUD/CAD today?
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