Buying AUDCAD on high yield gap in Aussie’s favor

The 10-day fundamental outlook for AUDCAD points to a high probability of the Australian currency strengthening against its Canadian counterpart, with the pair potentially reaching new peaks above 0.9850.

In late July, a rare short-term imbalance formed in the market, with local drivers temporarily overshadowing long-term global trends. The primary engine behind this turbulence is the sharp divergence in macroeconomic conditions between the two countries.

Let’s figure everything out step by step, starting with the monetary gap and yield differential. Note that the former is likely to be the key catalyst for AUDCAD dynamics.

Reserve Bank of Australia (RBA). The country’s interest rates sit high (4.35%) after a series of hikes in 2026. Governor Michele Bullock has recently reaffirmed that the regulator remains hawkish due to stubborn core inflation readings and fresh supply shocks. If necessary, the RBA may raise borrowing costs again at its August 11 meeting. This is why carry-trade hunters are watching the Aussie.

Bank of Canada (BoC). Unlike its Australian counterpart, the regulator has adopted a wait-and-see approach, keeping interest rates at 2.25% for six meetings in a row, including the latest on July 15. The wide monetary gap between the two central banks (4.35% vs. 2.25%) provides a fundamental tailwind for the Aussie, making it a more appealing destination for speculative capital.

What else to watch over the next 10 days?

Australia. The key release will be the Consumer Price Index (CPI) for the June quarter. Given the recent surge in core readings, the market does not expect anything good. If the data comes in even worse than projected, an August rate hike by the RBA will likely be inevitable, fueling the AUDCAD’s rally.

Canada. By contrast, the country’s economy is showing signs of a slowdown in inflationary pressure. According to the latest reports, the CPI has approached the BoC target range, effectively ruling out any talk of monetary tightening. On the flip side, this environment offers little support for the loonie.

A hawkish RBA stance, a wide RBA-BoC rate gap, and expectations of strong inflation in Australia hint at the pair’s potential upside.

The overall recommendation is to buy AUDCAD from the 0.98150 support level. Profits should be taken at 0.99000. Stop Loss could be set at 0.97700.

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.