Aussie/Canada

Another cross with potential for movement is the Australian dollar/Canadian dollar (AUD/CAD) pair, according to Brian Dolan, chief currency strategist at Forex.com. The pair was trading around 0.8500 at year-end, and Dolan sees a possible move to 0.9500 or parity.

Dolan believes a number of factors including interest-rate differentials, commodity exports, and regional growth opportunities are tipping in favor of Australia in the new year.

The Bank of Canada’s (BOC) lending rate currently stands at 1.5 percent; a 0.50-percent cut is expected at the Jan. 20 meeting. That compares to the 4.25 percent rate target currently held by the Reserve Bank of Australia (RBA), which is scheduled to meet next on Feb. 3. Further rate cuts are expected, with Dolan forecasting a bottom to the RBA easing cycle around 3.25-3.00 percent, which would still favor the Aussie dollar over the Canadian currency.

Dolan also interprets a more bullish commodity-export picture for Australia.

“Both are considered commodity currencies, but the big difference is that Canada is oil reliant and I expect oil prices to remain weak,” he says.

Australia is the world’s leading coal exporter and Dolan saw continued massive demand for coal from China.

“There is regional support for Australian commodity output,” he says.

Canada, Dolan notes, is closely tied with the U.S., which is in the midst of a recession, while Australia is close in proximity to the Asian region.

“Generally speaking, the Asian region seems to be faring best out of all the regions globally, which will support Australia,” Dolan says.

Dolan thinks the .8250 to .8400 zone is a good buying area for Aussie/Canada.

“Try to pick it up if we get some weakness near term,” he says.

Dolan says the strategy would be negated on a drop below .8000 if that were to occur. On the upside, he sees .9500 - 1.000 as an objective.