AUD/CAD: Loonie Steps On Aussie’s Gains

The Canadian dollar steps in on the Australian currency’s weekly gains and pares its losses after an earlier economic release from the world’s second largest economy wanes the Aussie. The hike in China’s exports, which was reported yesterday, boosted speculation that a strengthening economy will drive demand for the Maple Leaf’s commodities. Crude oil prices have likewise risen to a three-month high.

A report by Ari Altstedter of Bloomberg reads, Commodity currencies did well overnight, the Chinese data, with the exports jumping up the economy definitely looks like it’s rebounding, Chris Gaffney, co-chief investment officer at EverBank Wealth Management, said by phone from St. Louis. While growth is still not back in the double digits we believe that it will get back over sever percent to eight percent and I believe that’s got to put some wind back in the sails of the commodity currencies and Canada’s certainly benefited from that.

Improvement For The Loonie
True enough, the Loonie has strengthened against its currency counterparts in recent exchanges. Amid the improving outlook for the global economy and signs of a strengthening job market, economists are once more bringing forward estimates of a Bank of Canada rate increase into this year.

In contrast, a pick-up in Chinese inflation prompted profit taking in the Asian markets as shares in Asia fell earlier today. Chinese inflation rose 2.5 percent in December, overshooting expectations and dampening the chance for further policy easing as the nation recovers. The Aussie dollar pulled back from along the 1.0437 level as technical indicators signaled that gains in the currency could have been too rapid. The Aussie has been paring its gains on a weaker outlook.

Move Short
A short position is suggested for the AUD/CAD as the bearish momentum picks up towards the end of the trading week. Be wary though of probable technical price corrections.