I recommend considering a short position on the AUD/CAD currency pair as my trade of the week. This recommendation is grounded in a comprehensive analysis of recent market trends and key economic indicators.

Rationale for the Trade:Over the past fortnight, I have observed a notable resurgence in AUD-crosses. However, my analysis suggests that the current market environment presents an opportune moment to initiate a short position. My  decision is informed by several factors:

Upcoming Chinese Data: I anticipate significant market movements as pivotal Chinese data is slated for release later in the week. Specifically, both manufacturing and non-manufacturing PMIs are scheduled to be published on Thursday morning. It's worth noting that recent Chinese economic data has consistently fallen short of expectations, particularly within the manufacturing sector, which has already entered a contractionary phase.

Australian Inflation Trends: My evaluation of domestic economic indicators indicates a potential further deceleration in monthly inflation rates in Australia throughout August. This could exert additional downward pressure on the Australian Dollar (AUD), contributing to the rationale for my short position stance.

USD Strength Anticipation: My analysis aligns with the likelihood of USD strength in the near term, with potential reinforcement from month-end flows. Consequently, this USD strength is expected to drive Canadian Dollar (CAD) outperformance against other G10 currencies.

Trade Details: The following trade parameters are suggested:

Position: Initiate a short position on the AUD/CAD at the current rate of 0.8782.

Target: Set the profit target at 0.8600, aiming to capitalize on the anticipated downward movement in the currency pair.

Stop Loss: Implement a stop loss at 0.8850 to mitigate potential losses and manage risk.

Risk Disclosure:It's imperative to acknowledge that all investments come with inherent risks. The foreign exchange market can be volatile, and past performance is not indicative of future results. The decision to enter a short position on the AUD/CAD should be made with a clear understanding of the risks involved. Market conditions can change rapidly, and unexpected events may impact the trade's outcome. It is recommended to thoroughly assess your risk tolerance and consult with financial professionals before executing any trade.

In conclusion, my recommendation for a short position on the AUD/CAD is underpinned by a holistic analysis of relevant economic data and market dynamics. As with any investment, the decision to act should be accompanied by a thoughtful consideration of the associated risks and the potential for financial loss.

AUD to weakness on CAD back

Aug 31 2023

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