For the last 11 years, after the 2008 crisis, this pair has been in a narrow range. Traders made a lot of money trading without stopping from the borders of the channel. But things changed with the arrival of the coronavirus.
Above is the weekly schedule for the AUD/CAD pair. In March, the price broke through the minimum of 12 years and rushed into the abyss, reaching the level of 0.8. That is, the Canadian dollar rose sharply against the Australian dollar. And this is against the background of the strongest fall in oil.
Why did this happen? Australia’s economy is tied to China as much as possible. And with the crises (the same thing happened in 2008), it’s falling much harder than Canada’s, at the expense of reduced exports.
However, a miracle has happened. Against the background of pumping money by global central banks, the Australian dollar bounced up sharply, reaching 0.94 in June. All this against the background of now sharply rising oil prices. In other words, the Canadian is supposed to grow, but he fell heavily against the Australian.
Now we have the following situation. At any moment, the world, including China, will be overwhelmed by a second wave of coronavirus. Once again, there will be a drop in production, trade, traffic. What is waiting for a pair of AUD/CAD in this case? The answer is obvious, so we suggest watching it closely.
Meanwhile, stock indices around the world continue to feel very confident. The S&P500 has a real chance to rewrite historical highs.
But what’s next? These highs (slightly higher than in February), will be shown in a completely different economic situation. In winter, the world economy grew, and now many countries are experiencing a free fall. If you think that’s impossible and you short the market… then remember, nothing is impossible in the market.
Very interesting situation in EURO/DOLLAR pair. Already by habit, after taking the level at 1.13 and 1.14, everyone was waiting for the usual reversal and hike to the levels below 1.10. This is how it has been happening in recent years. Now the pair persistently refuses to repeat the scenario. Why? We know the answer.
Of course, he is not the only one influencing the situation, but he is extremely important for the world cash flows. We’re talking about the swap. For the last few years, carry trader have been making money selling Euros and buying dollars. Their earnings are still there now, but it has dropped dramatically. So, the risks of “sitting in this pair” only for the sake of swaps, begin to outweigh the potential yield.
What’s waiting for us today?
09.55 Markit Composite PMI Final
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