Canada’s surprise rate hike got traders selling AUD/CAD yesterday!
In case you missed it, the Bank of Canada (BOC) raised its interest rates by 25 basis points to 4.75% after keeping it at 4.50% for three decisions in a row.
AUD/CAD, which was consolidating near .8980, fell to the .8900 psychological area before enough AUD buyers stepped in.
AUD/CAD 1-Hour Forex Chart by TV
What makes yesterday’s downswing interesting is that it stopped at an ascending channel resistance that’s been around all month.
Not only that, but .8900 also lines up with the 61.8% Fibonacci retracement of this week’s upswing, last week’s resistance zone, AND the 100 SMA on the 1-hour time frame.
Are we seeing a pullback from a broader uptrend?
Word around Asian session traders is that Chinese banks have lowered their interest rates at the authorities’ “requests.”
The unexpected stimulus helped lift AUD against some of its counterparts, and the optimism could gain traction in the next trading sessions.
I’ll keep close tabs on tonight’s Chinese CPI data to see if AUD’s upswing is sustained.
Markets see producer prices falling by another 4.3% y/y (from -3.6%) in May while CPI could come in at 0.2% y/y from April’s 0.1% reading.
Lower-than-expected CPI would support the Chinese banks’ rate cuts and probably encourage a risk-friendly trading environment.
AUD/CAD could jump back to its .8980 previous highs if not the .9000 major psychological level.
If China’s price indices underscore disappointing post-lockdown growth, however, then AUD could continue to dip against CAD.
For now, I’m on the bullish side finding green candlesticks and aiming for previous highs.
What about you? Are you thinking of buying AUD/CAD today?
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