The skirmish between the ComDolls has the Canadian dollar gaining the upper hand over its Australian counterpart. An extension of late Friday’s bearish streak is seen to pick up today, as the currency pair feels the selloff demand. A sell bias is deemed for the trading pair as the week’s exchanges commence in New York today.
A report by Bloomberg today sees the Australian dollar on a decline due to speculation that disagreement on debt-crisis solutions among the Euro region’s leaders is curbing prospects for growth, and in turn is damping demand for higher-yielding assets. Greece and representatives of the troika of international creditors agreed to take a break from inconclusive aid talks. The International Monetary Fund, the European Central Bank and the European Commission said in a joint statement on September 21 that their mission to Athens for financial talks will take a “brief pause” and “expects to return to Athens after about a week.”
It did not help either that the release on German business confidence stayed near its lowest figure in more than two years. German business confidence as per the composite index by the Ifo Institute for Economic Research unexpectedly fell for a fifth straight month in September as the sovereign debt crisis clouded the economic outlook. The business climate index dropped to 101.4 from 102.3 in August, its lowest reading since March 2010. The debt crisis has pushed at least five of the 17 countries using the Euro into recession, which in turn has curbed demand for German exports. This does not help the plight of the Aussie, which is indirectly linked to Euro Zone growth in terms of its trade connection with China.
Further pressuring the Australian currency is the possibility of the Reserve Bank of Australia cutting rates as early as October. Analysts are pricing in a rate reduction as the RBA holds their policy meeting next week. In this months’ meeting, the RBA signaled scope to reduce rates should the outlook for the economy deteriorate significantly. On the global front, the downward pressure on China’s economy is increasing, reports the Economic Information Daily, citing the transcript of a speech by Zhang Ping, head of the National Development and Reform Commission. Europe’s debt problems are still at a “high risk” phase and the global economic recovery is “bumpy,” the newspaper cited Zhang as saying.
With no economic release from the Maple Leaf today, except for a public appearance by Bank of Canada Governor Mark Carney in a panel discussion in Ottawa today. The Canadian Council of Chief Executives will discuss on “Asia’s Rise and the Opportunities for Canada” in the said forum.
Considering the risk sentiment of the markets and the fundamental drivers of currency market trades today, a short position is advised for the AUD/CAD today. Be wary though of probable technical price corrections.
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