AUD: Confidence Check For Bulls; CAD: Rally Coming To An End For Now – Credit Agricole

The Australian dollar is losing ground on the “risk off” sentiment[1]. The Canadian dollar is clearly having its weakness exposed[2]. What’s next to commodity currencies?

Here is their view, courtesy of eFXnews:

Credit Agricole CIB FX Strategy Research notes that AUD/USD has reached levels that are looking excessive relative to the Australian-US 2Y rate differential.

As such, CACIB argues that in the near-term, it will be a confidence check for AUD bulls if they manage to keep the currency bid.

“External factors are likely to remain the main driver of the currency with US CPI data being the highlight, with UST yields being particularly important,” CACIB adds.

Turning to CAD, CACIB notes that it has now priced in much of this good domestic economic news as well as the low volatility environment globally.

While the long term trade in CAD is positive the near-term outlook is vulnerable to slowing in domestic data (in reaction to a tightening in financial conditions) and less buoyant risk sentiment globally,” CACIB argues.

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