The near-term bias for AUDCAD tilts positive, supported by multiple factors favoring the Australian dollar against its softening Canadian counterpart.
Here is why the Aussie holds the edge:
Monetary policy fortitude. The Reserve Bank of Australia (RBA) has one of the most hawkish postures among G10 regulators. With stubborn service-sector inflation keeping its interest rate anchored at 4.35%, the AUD retains its allure as a premier carry-trade currency.
China's supportive hand. A steadier economic pulse from China and rebounding demand for key exports, such as iron ore, give a direct, fundamental boost to the Aussie.
Notwithstanding these tailwinds, the primary threat to this bright outlook is a sharp global economic downturn, which might hit commodities the hardest. In such a risk-off scenario, the AUD is likely to suffer a steeper decline than the CAD.
Such a bullish bias for the pair is further reinforced by specific pressures on the loonie:
New dovish pivot. In stark contrast to Australia, the Great White North has embarked on a more aggressive monetary easing path. Markets are now pricing in Bank of Canada (BoC) rate cuts to 3.25%–3.50% in the coming months. This early shift undermines the loonie's interest rate appeal.
Missing energy tailwinds. The CAD is also deprived of its traditional catalyst as lackluster fuel prices fail to provide their typical cyclical boost.
Persistent domestic headwinds. Canada's growth forecast for 2026 remains anemic at 1.1%–1.4%, coupled with rising unemployment (6.8%–7.1%) and economic slack. This essentially forces the BoC to maintain a stimulative, low-rate environment.
Greater policy leeway. With inflation comfortably anchored at the 2% target, the central bank can prioritize scaling, which further cements the dovish policy outlook.
The result is a clear, fundamental force shaping the pair: the Aussie's compelling yield advantage. Investors are naturally drawn to higher-yielding currencies. With the AUD offering a 2.10% premium over the CAD (4.35% vs. 2.25%), capital is flowing from Canadian assets into Australian ones. This migration is steadily weighing on the loonie.
The ultimate recommendation is to buy AUDCAD at 0.9250. Lock in profits at 0.95400. Place Stop Loss at 0.9020.
Calculate your open position so that a potential loss (protected by a Stop Loss order) is limited to 1% of your deposit. If your account balance does not allow entering a position of this size, it is better to skip the trade and wait for other market signals that meet low-risk criteria.
This content is for informational purposes only and is not intended to be investing advice.
