Range's Technical Appeal of Fundamental Wave

There is considerable event risk for the majors (due to heavy-hitting US data and the GCC summit), carry pairs and a number of currencies whose central banks are scheduled to release rate decisions. To balance some of this risk, we will look to range trade AUD/CAD, a pair that is comprised of two commodity exporters whose central banks have a hawkish lean. Both the RBA and BoC are scheduled to release rate decisions next week, though neither is expected to shift their benchmark target.

Trading Tip – There is considerable event risk for the majors (due to heavy-hitting US data and the GCC summit), carry pairs and a number of currencies whose central banks are scheduled to release rate decisions. To balance some of this risk, we will look to range trade AUD/CAD, a pair that is comprised of two commodity exporters whose central banks have a hawkish lean. Both the RBA and BoC are scheduled to release rate decisions next week, though neither is expected to shift their benchmark target. However, this does not guarantee low volatility as there is a relatively stocked calendar. Aside from scheduled event risk, USD/CAD’s action around parity will likely act as a good guide for AUD/CAD. The suggested strategy uses a very aggressive entry and tight stop as it can be expensive to wait out a test of 0.89 to see if it is a genuine or false break. If spot hits 0.8750 before we are entered, we will cancel the order. Additionally, we will cancel any unexecuted orders on Thursday.

Event Risk Australia and Canada

Australia – All eyes will turn to significant event risk leading up to Tuesday’s Reserve Bank of Australia interest rate decision and Gross Domestic Product report, with Trade balance and Retail Sales figures likely to influence sentiment ahead of the key releases. Analysts predict that Retail Sales grew at a 0.6 percent pace through the month of October, as a robust labor market and strong consumer sentiment boost spending. Indeed, strong wage price pressures and consumer demand were behind the Reserve Bank of Australia’s decision to raise rates to 6.50 percent through their last meeting. Though analysts expect the bank will leave rates unchanged through their upcoming December announcement, there remains a very real risk that rates will continue to rise through upcoming months. A later Gross Domestic Product figure is likewise to force noteworthy volatility across Australian dollar pairs.

Canada – Event risk for the Canadian dollar will intensify in the week ahead, with a key Bank of Canada interest rate decision to easily drive volatility through Tuesday’s trade. Outlook is very mixed for the Bank of Canada’s result, with median consensus forecasts calling for unchanged rates. Yet 12 of 27 analysts polled by Bloomberg news predict that the central bank will actually cut rates by 25 basis points to 4.25 percent. Such indecision typically makes for strong reactions to a rate announcement. Otherwise, traders will look to Friday’s Employment report to drive volatility across Canadian dollar currency pairs.

Data for December 2 – December 9			Data for December 2 – December 9
Date	Australian Economic Data		Date	Canadian Economic Data
Dec 2	AiG Performance of Mfg Index (NOV)		Dec 4	Bank of Canada Rate Decision
Dec 2	TD Securities Inflation (NOV)		Dec 6	Building Permits (OCT)
Dec 2	Trade Balance (OCT)		Dec 6	Ivey Purchasing Managers Index (NOV)
Dec 3	Retail Sales (OCT)		Dec 7	Net Change in Employment (NOV)
Dec 4	AiG Performance of Services Index (NOV)
Dec 4	Gross Domestic Product (3Q)
Dec 6	AiG Performance of Construction Index

Taken from Daily FX News - Written by John Kicklighter and David Rodriguez, Currency Analysts