UBS sell order brought 1.7% gain

UBS bearish on the AUD/CAD pair

The UBS’s short-term bearish order, and recommendation, on the AUD/CAD, initially triggered at 1.0180, back on October 25, 2016, was deactivated at the price of 1.0000, summarizing a 1.7% gain.

UBS benefiting from economic differences

The idea for placing such order (recommendation) was to benefit from the economic differences between Australia and Canada, Asia and North America.

During the last weeks, the confidence level over Canada's recovery pace was somehow dovish, thus bringing the Canadian Central Bank to lock profit sooner than later.

The UBS's decision came along after the positive spillovers on Canada, arising from the expectations for higher fiscal spending in the US, and the appreciation in oil prices.

The Bank of Canada resumes worrying on the regional divergences between the largest cities and the rural energy areas.

Stephen Poloz, BoC Governor, stated that the bank is taking a conservative approach to Trump's election. The positive impact, following this election, could be stronger growth in the U.S. due to the increase in fiscal spending, supporting the Canadian exports, whereas NAFTA's potential reveal could threaten the nation's exports.

Furthermore, the rise of the Canadian yields, amid a jump in the U.S. yields, led to a weaker housing market, hurting households, amid the Bank of Canada stressing on a sluggish labor market.

Moreover, the UBS expects the USD/CAD pair to trade close to the 1.3200 zone, with its one-year forecast remaining at the 1.2500 area.

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