AUDCAD poised for further gains after brief consolidation

After a series of setbacks, the AUDCAD pair has finally broken through the 0.9 resistance level. Overcoming this important threshold has likely forced many traders with short positions to close them to avoid further losses. This is what is called a "short squeeze": when there are lots of bears leaving the market, the price suddenly goes up. Even the 0.913 level, which housed the previous 2025 highs, was breached without any problems. Buyers can now target last year's November peak of 0.927.

The AUDCAD has already surged in momentum, prompting the RSI indicator to become excessively overbought. Although no signal for a downward reversal has formed yet, opening long positions at current levels is not advisable. Cautious traders may wait for a pullback in quotes to the 0.913 level, from where there is a good chance for the next growth wave to develop. The MACD indicator is currently consolidating in positive territory, confirming the potential to buy any further dips.

In addition to technical factors, such as overcoming strong resistance, the powerful surge of AUDCAD has fundamental reasons too. According to a population survey conducted in September, inflation forecasts for the coming year increased from 3.9% to 4.7%. Under these circumstances, the Reserve Bank of Australia (RBA) is only expected to cut interest rates once by the end of 2025. On top of that, there is more than a 90% chance that the regulator will not loosen its monetary policy on September 30.

Meanwhile, the Canadian dollar is still trying to stabilize after the disastrous August labor market report. Expectations are growing for additional rate cuts from the Bank of Canada, with the next one possibly coming as early as Wednesday. Before that, on Tuesday, inflation data for the past month will be published. The release of these statistics could further weaken the Canadian dollar and strengthen the AUDCAD pair.

The following trading strategy may come into play:

Buy AUDCAD in the 0.913–0.920 range. Take profit: 0.927. Stop loss: 0.9.