AUD/CAD Could Be a Catch-Up Commerce in Q3: Q3 Prime Buying and selling Alternatives

Coming in to Q2 my commerce of quick AUD/CAD had been predicated on US exceptionalism and the rising divergence between the BoC and RBA. Whereas the US exceptionalism narrative dissipated, the theme of diverging financial coverage continues to bear watching. The divergence emerged was after the BoC tapered QE, whereas additionally signalling a charge enhance for H2 2022. In distinction RBA signalled no charge enhance earlier than 2024. In Q3 AUD/CAD could also be a catch up commerce with BoC tightening priced into the foreign money, whereas robust Aussie information (employment particularly) might even see the RBA to deliver ahead charge hike expectations.

In the meantime my view is that USD will head increased from present ranges. The consensus commerce for arguably the previous 12 months has been to quick the USD as evidenced by CFTC information exhibiting the build-up in web quick positions. Nevertheless, the FOMC’s hawkish pivot wherein the dot plot projections now see two charge hikes in 2023 from zero, means that the central financial institution’s response operate has modified with FOMC much less prepared to permit the financial system to run scorching. Below these situations, financial information will matter extra and spur heightened volatility on information releases.

On the financial coverage entrance, the principle dates to focus are the Jackson Gap Symposium (marks one 12 months because the launch of AIT) and the September financial coverage assembly. Given the sizeable web quick USD positioning, an unwind can present gasoline for a extra extended rise as we head in the direction of a Q3 taper sign. So as to add to this, a rise in “demise of the greenback” reporting late in Q2 coincided with the dollar’s low level, which may counsel that the ache commerce can be for a extra persistent rise within the USD.

USD Chart: Day by day Time Body