The rates continue within the downward trend. Both currencies are under pressure due to the trade conflict between the US and China, as well as the slowdown in the global economy. Nevertheless, investment in the Australian dollar seems to investors more risky because the Australian economy is highly dependent on the situation in China, where under the influence of duties, investors fear a slowdown in production and business activity. Decreases in the imports of raw materials have already begun.
The economy of Canada as a whole looks stronger than Australia's. In addition, Canada managed to negotiate with the United States to remove duties on imports of aluminum and steel, which stimulates the Canadian economy. Unemployment fell to 5.4 per cent in May, the lowest rate since 1976. In May, 27 thousand jobs were created, which is more than 3 times the forecasts of investors. Another impressive macroeconomic report this week was received from the real estate market: the number of construction permits in May increased by 14.7% in April to a record level, while the expected growth was just 1.3%. The negative factor for CAD is oil, which again becomes cheaper and is approaching the psychological mark of $50 per barrel of CL/WTI. At the same time, oil reserves in the US continue to grow steadily, putting pressure on the market.
The Australian dollar, as mentioned earlier, is highly dependent on external factors. This week, the AUD managed to strengthen against the CAD due to the quick finish of the trade conflict between the US and Mexico, which caused a wave of optimism on the market at the beginning of the week. In addition, despite investors' negative forecasts, the economic downturn in China so far is not too strong. On the contrary, given the latest data on the Chinese economy, we can see an improvement in the economic situation: the trade surplus rose to 41.65 billion dollars, which is 2 times higher than investors' forecasts. Also, we observe accelerated inflation processes.
The key day for the AUD/CAD will be Friday, when data on the volume of production in China, as well as the unemployment rate in China are published. We suppose that the deals on the trend in favor of the CAD will be more effective. The decline in oil prices will be limited because the prices are already closing to the minimum at the moment, and the trade conflict between China and the US affects the Australian dollar more. Most technical analysis tools, including the Stochastic oscillator, also signal the efficiency of the deals to SELL.
