Although falling oil does not stop the Canadian currency from strengthening against the Aussie

AUDCAD has successfully achieved the falling targets in accordance with the previous forecast. Although the trend of this currency pair has not been holding for as long as the dollar index has, it still allows market participants to join the main trend and make a profit. Let's see how the situation has changed over the past 2 weeks.

As expected, the Reserve Bank of Australia (RBA) raised the key rate last week by 0.25% to 2.85%. The Reserve Bank of Australia (RBA) last week, as expected, raised its key rate by 0.25% to 2.85%. Tiny hike reflects the concern of Australian officials over too tight financial conditions, which could lead the national economy into recession.

A dilemma arises. On the one hand, the economic data is already showing that a recession is coming: there is a decline in manufacturing, construction and mortgage lending activity, as well as lower consumer confidence. On the other hand, inflation seems unlikely to decline and people's expectations of future price growth are again showing a sharp rise after 4 months of decline.

The RBA's attempt to have foot in both camps has arguably little chance of success, and the bottom line is that it has to choose between supporting the economy or fighting inflation. If there actually is a crisis, the first thing that will have to be done will be to save the economy, which will hardly cause the AUDCAD to grow.

There is no chance of Canada avoiding the consequences of the global recession, but so far the country is doing much better than Australia. On Friday a monthly report on the labor market was released, which showed an increase in workplaces by an impressive 108.3 thousand, which was the highest since March. This shows the good state of the national economy on one side and allows the Bank of Canada to continue raising its key rate with less concern on the other.

The fundamental superiority of the Canadian currency over the Australian one is clearly demonstrated during this week: since the beginning of the week oil, Canada's main export commodity, has depreciated 6.5%, but AUDCAD continues its descent. The October low of 0.8598 can be updated very soon.

The following option of the trading strategy can be suggested:

Sell AUDCAD no higher than 0.873. Take profit 1 – 0,863. Take profit 2 – 0,86. Stop loss – 0,875.

Also traders can use Trailing stop instead of a fixed Stop loss at their discretion.