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#1 Posted : Tuesday, July 24, 2018 9:52:19 PM(UTC)

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Joined: 1/16/2018(UTC)
Posts: 21

I was in Shakespeare's birthplace yesterday for my daughter's birthday in the town of Stratford-upon-Avon. It is in the play Richard the III which has the line, 'Now is the winter of our discontent...' This could well be the case for the Australian dollar as it finds itself increasingly tied up in the US-China trade war.

Copper prices have been falling since June.

The feared slowdown in the Chinese economy has a knock on effect as investors and developers are hitting the pause button in order to try and avoid getting caught up in Trump's tariff bonanza. It seems there is a new one every week. If this slowdown starts being reflected in manufacturing and production data out of China the sell off in metals is only going to get worse. What's bad for China is bad for Australia, with their economies so closely tied to one another.

On Wednesday at 1330 GMT we have the Australian CPI data. Another flat reading is expected, see Eamonn's preview here. The RBA's target band is 2-3% and they are still off that mark, currently outside that range at 1.9%. For me the trade is to fade any small beat in CPI , if we gat any, other than that it should be more of the same in terms of Australian dollar weakness.

By contrast the Canadian dollar is doing much stronger as I mentioned yesterday: 1 cad to aud rate at 1.02444 There was a beat for the Canadian retail sales 2.0% vs 1.0% expected and the CPI data that was out on Friday 2.5%y/y vs 2.3% expected. Adam was also talking about the Canadian housing bubble crisis receding into the background too on Friday. Worth watching as Adam talks a bit generally about the Canadian economy.

So, I favour a AUD/CAD trade medium term. Looking at the weekly AUD/CAD chart there is a ABCD pattern that offers a straightforward trade. Target the C-D leg.

Edited by user Tuesday, July 24, 2018 9:53:11 PM(UTC)  | Reason: Not specified

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