AUDCAD is likely to maintain its upside potential in the coming weeks, as the fundamental balance gradually shifts in favor of the Aussie—largely driven by the Reserve Bank of Australia’s (RBA) hawkish tone. With borrowing costs sitting high at 4.35%, inflationary pressure in the country remains elevated. The annual Consumer Price Index (CPI) jumped to 4%, while core readings settled at 3.6%. These sticky figures rule out any imminent monetary easing, forcing the regulator to stay tough. The Australian dollar benefits from this environment, particularly when domestic demand is steady and the labor market is robust.
The loonie cannot boast the same. The Bank of Canada (BoC) held interest rates at 2.25%, hoping for an economic recovery. June inflation declined from 3.2% to 2.8%, allowing the regulator not to rush into hikes. On the contrary, lower CPI figures fueled market expectations of a softer BoC stance. Therefore, a monetary gap between the two central banks continues to widen, setting the stage for further upside in AUDCAD.
In addition, the loonie is burdened by the tense trade relations between Canada and the United States. Threats of new US import restrictions could have a negative impact on its neighbor’s exports, business activity, and overall economic health. A significant buildup of speculative short positions on the loonie confirms that market sentiment is worsening.
The ultimate recommendation is to buy AUDCAD at the current price of 0.98300, targeting 0.99000 within one month. For better risk management, place a Stop Loss order at 0.97800.
This content is for informational purposes only and is not intended to be investing advice.
