AUD/CAD Likely to Resume Downtrend Amid Surge in Canadian Building Permits

Home » AUD/CAD Likely to Resume Downtrend Amid Surge in Canadian Building Permits

Australia – Cash Rate

On Tuesday, at GMT 4:30 a.m., the Reserve Bank of Australia (RBA) released the official cash rate. It is the interest rate that major Australian banks and financial institutions pay to borrow funds held at the RBA.

Short-term interest rates are the primary factor in the valuation of the Australian Dollar against other major currencies. So, Forex traders pay close attention to any changes in the official cash rate.

The RBA left the cash rate at 0.10% in their last meeting. In this meeting, analysts were expecting it to remain at 0.10% and the actual rate was left unchanged as expected.

Canada – Building Permits

On Wednesday, at GMT 12:30 p.m., Statistics Canada published the monthly Building Permits figure. It measures the changes in the total number of new permits issued for constructing new premises in the country.

Building permits are mandatory to start building construction. So, the number of new permits acts as a leading indicator of the future construction activity in the country. Also, binary options traders consider that new constructions help energize the economy, as new buildings require materials from many other industries.

Last month, the amount of new Building Permits declined by as much as -12.9%. Analysts were expecting it to grow at 6.0% this month. However, the actual figure came out way better and grew by 6.9%.

AUD/CAD Forecast

The AUD/CAD remained bearish since the end of February 2021. Over the last several months, it has gone down by around 850 pips. This week, it fell to 0.9144 and started a bullish retracement toward the downtrend line. Earlier today, the AUD/CAD tested the downtrend line but failed. As a result, it fell sharply and currently, it is trading below the support near the 0.9260 level.

The Australian overnight cash rate was left unchanged at 0.10% to support the economy. On the other hand, the Canadian building permits grew by 6.9%, much better than the expectations. We believe it would set a bearish fundamental outlook for the AUD/CAD this week. Therefore, if the AUD/CAD closes below the support near0.9260, it would likely attract additional bearish momentum in the market.

Hence, binary options investors should look out for trading opportunities below this major support level around 0.9260.

Asif worked as a prop trader for almost a decade, and later he managed trading operations for one of the largest foreign exchange strategy developers in Europe. Currently, he works as a trading consultant to several brokers and writes on various tech and financial topics. You can reach him at contact@asifimtiaz.com

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