Following AUDCAD’s prolonged rally to multi-month highs, the pair has recently entered into a correction. Such a change was triggered by a tandem of factors: profit-taking on the Australian dollar ahead of the central bank’s meeting and a temporary rebound in its Canadian counterpart amid higher oil prices.
Currently, the primary catalyst for AUD is heightened market expectations of a 25-basis-point hike by the Reserve Bank of Australia (RBA) at its February 3 meeting, which could bring rates to 3.85%. Investors see a 73% chance of this outcome. These estimates stem from high inflation figures in December. Moreover, this view is supported by the four largest national banks, which also anticipate policy tightening.
Meanwhile, the loonie remains under pressure due to ongoing trade uncertainty. The country's merchandise deficit rose to $2.2 billion Canadian dollars in November, significantly exceeding forecasts. Metal exports dropped by 24.4%, while auto deliveries, as well as its components, fell by 11.6%, marking the steepest decline in three years. Bank of Canada (BoC) Governor Tiff Macklem warned of another potential economic shock, leaving the regulator with no alternative but to postpone monetary tightening.
The technical setup aligns with the fundamental narrative, showing that AUDCAD is correcting after the recent rally. The Stochastic Indicator, with its %D line (72) sitting above the %K one (58), is generating a sell signal and confirming waning bullish momentum. The Chaikin Oscillator, while still positive, is gradually declining from its peaks, suggesting that buyers are losing the initiative. However, this appears to be a technical correction within a still-supportive fundamental environment for the Australian dollar. The upcoming RBA rate decision may trigger a new wave of the pair’s growth.
Consider the following strategy for your trading:
Buy AUDCAD at the current price before the RBA makes an interest rate decision. Place Take profit at 0.96500. Set Stop loss at 0.93650.
This forecast remains relevant from January 30 till February 6, 2026.
This content is for informational purposes only and is not intended to be investing advice.
