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Day two: our potential AUD/CAD trade

Overnight we saw a very poor Canadian IVEY PMI (manufacturing) report, which at 46.9 was a huge miss against consensus and showed strong contraction.

AUD
Source: Bloomberg

On a more positive note we saw a strong building approvals report and the Bank of Canada’s Q2 Business Outlook Survey, which highlighted some very positive trends in the Canadian economy, with 24% of the firms which were surveyed expecting sales over the coming 12 months to increase.

AUD/CAD rallied to a high of 1.0014, testing the May 28 low of 1.0009 and the 23.6% retracement of the recent sell-off. Recall I suggested looking to sell rallies to 0.9995.

At 11:30am today we get NAB business confidence, although there is no survey so traders can’t really position for the release. Stochastic indicators are still below 20, thus price should stay weak and I continue to feel downside risks remain for this pair.

At 10:30pm we get Canadian housing starts (June), with economists expecting a 4% decline in starts to 190,000. A good number here could push AUD/CAD lower.

Spot FX AUD/CAD chart
Click to enlarge

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