Source: PaxForex Premium Analytics Portal, Fundamental Insight
Minutes from the February Reserve Bank of Australia meeting showed a shift from easing interest rates and a hint towards higher rates for longer, as inflation has shown signs of an upward move. The minutes indicated that most policy members believe Australia has reached peak interest rates but added fewer interest rate cuts compared to other developed economies could follow. The consensus is for a total reduction of 50 basis points in 2024. It could provide a floor under any Australian Dollar sell-off in the short term. Other central banks are likely to scale back expectations for aggressive monetary policy easing as underlying inflationary trends remain strong and have begun to increase in 2024.
The Chinese 1-Year Loan Prime Rate for February was reported at 3.45%, and the Chinese 5-Year Loan Prime Rate at 3.95%. Economists predicted a figure of 3.45% and 4.10%. Forex traders can compare this to the previous Chinese 1-Year Loan Prime Rate for January, reported at 3.45%, and the Chinese 5-Year Loan Prime Rate reported at 4.20%. The bigger-than-expected cut in the Chinese 5-Year Loan Prime Rate confirms a steeper economic slowdown, dragged lower by ongoing issues in the real estate sector.
The Canadian CPI for January is predicted to increase by 0.4% monthly and 3.3% annualized. Forex traders can compare this to the Canadian CPI for December, which decreased by 0.3% monthly and expanded by 3.4% annualized. The Canadian CPI-Median for January is predicted to rise by 3.6% annualized, and the Canadian CPI-Trimmed by 3.6% annualized. Forex traders can compare this to the Canadian CPI-Median for December, which accelerated by 3.6% annualized, and to the Canadian CPI-Trimmed by 3.7% annualized.
The forecast for the AUD/CAD turned cautiously bearish as short-term downside pressure increased following a bounce in price action. This currency pair trades below its descending Kijun-sen but above its upward-drifting Tenkan-sen with bearish pressures accumulating. Adding to selling pressure is the descending Ichimoku Kinko Hyo Cloud, with the Senkou Span A and the Senkou Span B moving lower. Traders should also monitor the CCI after it has spiked into extreme overbought territory. This technical indicator could enter a sideways trend, and traders should monitor it for the potential of forming a negative divergence. A sustained breakdown below 100 may trigger a sell-off. Can bears regain control over the AUD/CAD and force price action into its horizontal support area and a fresh 2024 low? Subscribe to the PaxForex Daily Fundamental Analysis and earn over 5,000 pips per month.
Should price action for the AUD/CAD remain inside the or breakdown below the 0.8795 to 0.8845 zone, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Short Position
- Entry Level: Short Position @ 0.8820
- Take Profit Zone: 0.8610 – 0.8660
- Stop Loss Level: 0.8875
Should price action for the AUD/CAD breakout above 0.8845, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Long Position
- Entry Level: Long Position @ 0.8875
- Take Profit Zone: 0.8915 – 0.8975
- Stop Loss Level: 0.8845
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