The AUDCAD outlook remains unclear, as the Aussie and loonie are currently in a tug-of-war, with positive economic data from Australia on the one side and rising oil prices, beneficial for Canada, on the other. Which one will be the winner depends on further market dynamics. Let’s take a closer look at the broader picture for a better understanding.
1. Australia’s robust labor market
Today’s report confirmed the country’s economic resilience despite relatively high interest rates.
Unemployment remained low, leaving the national central bank with little choice but to postpone monetary policy easing in the near term.
With borrowing costs at 3.85%, the Aussie appears to be a more appealing option for carry trades compared to currencies from countries that have recently begun cutting rates. This builds a solid floor for the pair, preventing a sharp decline.
2. Commodity standoff
AUDCAD is a rare bird, as both currencies are closely tied to commodity markets. Australia is one of the world’s largest exporters of gold and iron ore, while Canada is among the leading oil producers. However, they are now moving in opposite directions.
Canada’s factor. Rising tensions in the Middle East have recently pushed crude prices to $70 per barrel, with strong potential to climb above $72. This acts as a tailwind for CAD, anchoring the pair at current levels and preventing a decisive surge.
Australia’s factor. As noted, AUD is linked to gold and iron ore exports. These markets are now sending mixed signals, with the precious metal soaring to all-time highs and the other asset struggling because of high uncertainty in China's construction sector. As a result, the Aussie’s upside is capped by this factor.
3. Monetary divergence
The Bank of Canada (BoC) is expected to ease monetary policy way earlier than its Australian counterpart, as the latter has less trouble with mortgage rates.
Summary for the coming days:
Bullish scenario. If Brent prices slide to $68, the loonie could weaken, quickly sending AUDCAD to 0.9725.
Bearish scenario. If tensions around Iran escalate and drive oil quotes to $75, the Canadian dollar may strengthen and pull the pair down to 0.9580.
The overall recommendation is a compromise scenario based on technical analysis: regardless of the outcome, the pair appears set to retest 0.9695. Buy AUDCAD from the current level. Place Take profit at 0.9695 and Stop loss at 0.9640.
The volume of the open position should be calculated so that the potential loss (protected by a Stop Loss order) does not exceed 1% of your deposit. If your account balance does not allow opening a position of this size, it is better to avoid entering the market on this signal and wait for other trade options that meet low-risk criteria.
This content is for informational purposes only and is not intended to be investing advice.
