Westpac sees the pair falling on potential BOC hike
Westpac recommends selling AUD/CAD at 1.0040 (spot at 1.0004) with a target of 0.9800 and a stop at 1.0120.
The pair has rallied to parity in the past week after falling as low as 0.9736 earlier this month.
The main rational is that the market is overinterpreting the comments from the RBA in today's minutes.
"RBA speakers may take the opportunity to address this," they say. The RBA's Debelle and Bullock speak on July 21.
Other factors that will come into play:
- Potential risk aversion could weigh on AUD more heavily
- Australian jobs data is a major risk
- The market is underpricing the risk of a BOC hike in Sept
"Markets attach a higher chance to a BoC hike at their 25 Oct meeting (MPR due) than their next meeting 6 Sep. The 28% probability for 6 Sep hike is too low given the BoC's expectation that the output will be closed by year's end and crystal clear signaling to unwind 2015's insurance easings," they write.
