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Andreas Zanin
Analysis | August 24, 2021

AUD/USD & AUD/CAD: outlook and forecast

We have been bearish of AUD/USD in recent posts and the AUD has fallen but we are oversold and expect a correction to the upside before lower prices. We are also bullish on AUD/CAD and view it as an excellent risk to reward swing trade. Our view of the fundamentals, sentiment, and technicals below…

The AUD long-term trend is now down and we expect it to continue – we are heavily bearish of commodities and expect them to fall further which will weigh on the Aussie. We also expect a reduction of stimulus by the Fed soon and possible corrective action in stocks to push the AUD lower.

Sentiment and Trader Positioning

We have seen a big fall and speculators have built up a big short position while commercial hedgers have gone heavily long which warns of corrective action to the upside:

The above points to a correction of oversold but the big trend remains down. In terms of the AUD/CAD, the AUD is oversold against the CAD on the COT so we expect this cross to bounce to the upside.

Commodities Fall and More weakness to Come

In terms of the AUD, iron ore has fallen hard and we expect coal to also sell off heavily. Iron ore and coal are the two biggest exports and if they fall to the levels we expect they will wipe out Australia’s current account surplus which is heavily bearish for Australia going forward.

Technical Analysis

on the monthly chart we have resistance at 0.7400 and our downside targets are 0.7000 with a possible run on down to 0.6500. On the daily chart we would look for prices to top out into 0.7300 and go short with a stop behind 0.7400 or of we run up to 0.7400 look to sell off the level on weakness.

in terms of AUD/CAD, its moved down and volatility has been low – we expect the selling to exhaust and a move up to 0.9300 or possibly even 0.9400 to correct its oversold condition.

 

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