Temporary surge in oil prices won’t stop AUDCAD’s long-term ascent

The AUDCAD currency pair is poised to end this week with a drop, retreating from a local high of 0.96982. Soaring oil prices—triggered by escalating tensions between the United States and Iran—are the main driver behind the current market dynamic. The Canadian dollar, closely tied to crude exports, is now gaining strength, outweighing positive macroeconomic data from Australia and pushing AUDCAD lower.

Nevertheless, fundamental factors are still on the Aussie’s side. Minutes from the central bank’s latest meeting confirmed that inflation is high and the labor market is hot. As a result, the regulator raised interest rates to 3.85%. January employment figures came in stronger than expected, while wage growth held steady. These factors increase the probability of another rate hike in May and keep AUD afloat.

In contrast, the Bank of Canada (BoC) is rather dovish. The country’s inflation slowed to 2.3% in January, making a rate cut scenario in summer increasingly plausible.

However, in the short term, surging crude prices carry more weight for the market than monetary policy divergence. The threat of supply disruptions is almost tangible, as tensions between the US and Iran put the Strait of Hormuz—through which roughly 20% of global oil deliveries pass—at risk. With an elevated geopolitical premium, CAD is likely to get additional support. But keep in mind that gold, closely linked to the Australian economy, also tends to rise during periods of instability. Therefore, AUD won’t go down without a fight, offsetting some negative effects from increasing crude prices.

Technically, AUDCAD is now stuck in between after its recent correction from a local high of 0.96982. The Stochastic Indicator is drifting aimlessly in neutral territory. The Chaikin Oscillator, while still positive, is heading down, signaling that sellers are slowly gaining control.

Consider the following trading strategy:

Buy AUDCAD at current levels, near 0.96280. The geopolitical risk premium is likely to be temporary, and once its effect begins to fade away due to diplomatic efforts, fundamental drivers should reassert themselves and resume the pair's uptrend. Place Take profit at 0.97400. Set Stop loss at 0.95660.

The forecast is valid from February 20 till February 28, 2026.