AUD/CAD: Aussie bulls hit by Westpac, the US-China trade talks now in focus

• AUD/CAD dropped to 0.9420 during early Asian sessions on Thursday.
• The pair initially rallied on upbeat Australian employment report but trimmed all the gains on news that Westpac cut its interest-rate forecast for the RBA.

AUD/CAD trimmed its 50 pip gains with an intra-day low of 0.9417 on early Thursday. The Australian Dollar (AUD) declined across the board on Westpac’s rate-cut expectations from the RBA after it surged earlier on the January month employment figures. Looking forward, the re-start of a crucial phase of talks between the world’s two largest economies in Washington will be closely observed for antipodean traders.

As per the jobs report, the employment change increased by 39,100 against the market consensus of 15,000 while the unemployment rate remained unchanged at 5.0%. Full-time jobs rose 65,400 after declining -3,000 during December last-year whereas part-time employment declined 26,300 versus 24,600 rise seen in the previous month. Additionally, participation rate beat the forecast and previous release of 65.6% with 65.7% figure.

In spite of upbeat employment report likely making the Reserve Bank of Australia (RBA) meeting on March 05 a welcome event for Aussie traders, Westpac immediately updated their rate forecasts expecting a 0.25% cut in both August and November this year.

The latest report by the Westpac says,

Westpac now expects the Reserve Bank to cut the cash rate by 25bps in both August and November this year. We have revised down our GDP growth forecasts for 2019 and 2020 from 2.6% to 2.2%. With the slower growth profile we now expect to see the unemployment rate lift to 5.5% by late 2019. That makes a strong case for official rate cuts to cushion.

Having witnessed a seesaw move around the employment details, investors may now shift their attention back to on-going trade discussion between the US and China. After the US delegates returned from Beijing, China’s Vice Premier Liu He is scheduled to visit Washington for a two-day negotiation period.

So far, there hasn’t been any concrete detail of the progress in negotiations while the two sides are still struggling to solve major issues like intellectual property rights and economic restructuring demands from the US. Additionally, the US recently added one more point to its Memorandum of Understanding (MoU) that will be put forward for discussion. The phase mentions the requirement of limiting Chinese Yuan (CNY) against the US Dollar.

Given the fact that China is the largest consumer to Australia, any negatives on the trade deal can drag the Aussie further towards the south.

On the other hand, the Bank of Canada (BoC) Governor, Stephen Poloz, is scheduled to speak about monetary policy at the Chamber of Commerce of Metropolitan Montreal at 17:35 GMT. The BoC has been dovish off-late and any confirmation to the bias may add weakness into the Canadian Dollar (CAD).

AUD/CAD Technical Analysis

AUD/CAD can now avail 0.9415 and 0.9380 as supports if managed to continue being under 0.9485.

Should the pair rallies beyond 0.9485, 0.9530 and 0.9580 may please the bulls.