FxWirePro: AUD/CAD risks skewed to the downside as BoC set to resume hiking cycle after NAFTA deal

AUD/CAD chart on Trading View used for analysis

AUD/CAD is eking out marginal gains on the day after 'hammer' formation on the previous day's candle. Intraday bias remains neutral for now.

Market focus will be on Bank of Canada’s policy decision where a 25bps hike to 1.75 percent is priced in. Clearing the roadblock regarding NAFTA has effectively sealed the deal for the third interest rate hike of 2018.

Bank of Canada officials are likely to proceed only gradually with the rate hike cycle given major risks to the outlook. However, there is some speculation that Gov Poloz may choose to accelerate that schedule now that the trade deal is signed.

That said, a strengthening Canadian dollar (supported by rising crude prices) is another reason for Poloz to be wary of an aggressive rate hike cycle.

Major trend for AUD/CAD is bearish. We see reversal only on breakout at 110-EMA at 0.9501. Rejection at 21-EMA could see resumption of weakness. Scope for test of 0.9104 (Oct 4 lows).

For details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex.