In both Europe and the USA, everyone has already accepted the second wave of coronavirus. It is likely that we will only see relief by next summer. With the warmth in the northern hemisphere, the spread of the virus will decrease. Plus, everyone is waiting for the vaccine in the first half of 2021. But there is still six months to come. What should traders do?
Above is the weekly schedule for this pair. What do we see on it? The Australian dollar fell sharply in February-March against the Canadian dollar, in hysteria over the first wave of coronavirus. Why did this happen? Coronavirus or just any crisis, there is no big difference. Traders must remember that in any problem in the global economy, the Australian dollar always falls faster than the Canadian dollar.
Australia is a more resource-based economy, and it is also heavily tied to China. That’s why it always suffers to the fullest extent. Canada is a stronger country, and it is no coincidence that it is in the G7.
During the summer, the Australian dollar rose significantly against both the Canadian dollar and the US dollar, as well as against the EURO, as a result of the positive developments associated with pumping the economy with money and the declining incidence of coronavirus. Now it is time for a correction in the second wave of the pandemic. If you prefer to take small risks, it is best to sell the Australian in pairs with the Canadian dollar. They are 2 commodity currencies, but as we have shown above, the Canadian dollar is more resilient in times of crisis.
The fundamental picture is clear. And the technical one in the weekly chart above says that the top has formed and has turned down.
What are the risks of selling the AUD/CAD pair?
The main risk is a sharp drop in oil to levels of $15-25 per 1 barrel. And, just as importantly, oil must stay there for several months. This will hit both the Canadian economy and the Canadian dollar hard.
However, if this happens, it is likely that coronavirus will be the culprit, which means that things will be much worse in the world economies than they are now. In this case, the Australian dollar will also fall sharply.
What awaits us today?
08.00 Retail sales in Germany for September
11.00 GDP in the EU for the 3rd quarter
11.00 EU consumer price index for October
14.45 Chicago PMI Index for October
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