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Chart of the Day: AUDCAD

The AUD has emerged as the weakest link in G10 FX. While I’ve looked at AUDCAD as the Chart of the Day, the biggest percentage falls were seen against the CHF.

AUDCAD daily

AUDCAD has come up on the radar, with the pair printing an outside day reversal and smashing through the range low, to trading at the lowest levels since 2010. While as traders we need to see how price reacts on the break of the horizontal support, the fundamental picture suggests this will now trend lower — predominantly on growing central bank divergence.

A truly poor set of global manufacturing data points will keep the lid on high-beta currencies (such as the AUD or NZD), with the lion share of attention placed focus has been on the US ISM manufacturing report, which fell to 47.8 — the worst print since June 2009. Of course, we have to revert back to yesterday’s RBA meeting and see a bank that said they’ll adjust monetary policy if needed, effectively opening the door to another rate cut in either the November or December meeting. In fact, if we look at the aims the bank has with regards to full employment and achieving its 2% - 3% inflation target, one suspects we need to have a more robust discussion about either unconventional monetary policy or a greater fiscal response, as rate cuts won’t achieve their objectives.

It’s easy to see a trade case where any rallies in the AUD will be savaged.

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