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Commodity Currencies Outlook: AUD and NZD recovering amid increase in risk appetite; CAD dragged lower by Oil

Market Analysis /
26 Feb 2019

The commodity currencies are benefiting from both a broad Dollar weakness, as well as an increase in risk appetite amid renewed optimism about a potential trade deal. Traders are now wondering if this is the start of a proper recovery rally or just a short-term bounce. The two events that could determine this are the speech by Fed Chair Jerome Powell and the on-going trade talks between the US and China.

Should Powell show his dovish side again, the pressure on the Greenback may increase, which would then benefit the commodity currencies. Further progress in the trade talks could also boost risk appetite.

Australian Dollar

  • AUD/USD had a decent bounce off 0.7050 support and is currently approaching 0.72 resistance
  • The currency pair may face heavy resistance near the 200 DMA – which currently lies around 0.7250
  • A clear break above that line could be seen as bullish sign, with 0.74 the next important resistance level
  • The key events for the AUD this week are HIA New Home Sales on Wednesday and the AIG Manufacturing Index on Thursday.

New Zealand Dollar

  • NZD/USD managed to bounce off the 200 DMA and is moving towards 0.6940 resistance – a level at which the currency pair was rejected on the last two tests
  • NZD bulls need a clear break above 0.6940 for the Kiwi Dollar to gain momentum
  • The next level to watch would then be 0.7060 (July 2018 high)
  • Notable data releases out of NZ include ANZ business confidence on Wednesday and Building Consents on Thursday

Canadian Dollar

  • The decline in Oil prices today dragged the Canadian Dollar lower
  • However, the downtrend in USD/CAD remains intact and the daily close below the 200 DMA suggests the currency pair might struggle in the near-term
  • Major support is seen at 1.3070, followed by 1.2970
  • Notable data releases out of Canada include inflation data on Wednesday, followed by the latest GDP figures on Friday

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