With the lack of supporting data from the Maple Leaf, the Canadian dollar is foreseen to make way for gains by its Australian currency peer. More of the Asian commodity dollar is perceived to be purchased after earlier reports that Australian consumer sentiment surged to a 26-month high. Market participants are also likely to look into consumer spending data from the world’s largest economy, which could likewise affect the demand for the Canadian asset.
With the increased payroll taxes affecting US consumers at the start of the year, it would be of importance how consumer spending held up in January, especially as talks of sequestration were touched on President Obama’s State of the Union speech. Median estimates place a decline to 0.1 percent figure on US retail sales for January. A similar decline to 0.1 percent in retail sales excluding autos in the same period is also forecast. Slower gains in the retail sales figures are seen to adversely affect the Loonie and send demand to the stronger Aussie today.
True enough, the Australian dollar rose against most of its major peers after the Westpac Consumer Confidence report posted a more than two-year high. The increase eases expectations of lower interest rates, as swaps traders reduced bets that the Reserve Bank of Australia will lower the overnight cash-rate target from 3 percent in March.
“The odds of a RBA rate cut in March have now slipped a little bit” after the release of the consumer-confidence survey, said Jonathan Cavenagh, a currency strategist in Singapore at Westpac Banking Corp. “The near-term risks are that it can head higher,” he said, referring to the Australian dollar.
These fundamental data could direct the Loonie lower against the Aussie, which suggests a buy position for the AUDCAD. But it would be best to wait for the technical correction to end before entering a buy on the currency pair, after the price index neared the overbought position.
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