AUDCAD rises against declining oil

AUDCAD currency pair is consolidating in a narrow range of 0.902-0.910. The Australian dollar still looks strong against the Canadian dollar.

Recall that on May 2, the Reserve Bank of Australia raised its key interest rate by 25 basis points to 3.85%. At the same time, analysts expected the rate to remain at the same level.

The regulator refused to say anything about future rate hikes. However, it was said about the need for further tightening of monetary policy, which can be interpreted as a softening of rhetoric.

The Australian dollar reacted with strong strengthening due to the rate hike. This movement may continue, as there is nothing to prevent the regulator from raising the rate further against market expectations.

The decline in oil prices is a support for the AUDCAD growth. Since the beginning of April, oil prices have corrected by about 10%. The Canadian dollar depends on the dynamics of oil prices, as Canada is one of the largest oil exporters. A decline in oil prices hits the country's budget, which leads to a weakening of the national currency.

The forecasts for oil remain negative. At the moment, the economy is showing signs of slowing, which could potentially weaken demand for energy sources. Since the beginning of the year, oil has already fallen by about 9% under the recession risk and the U.S. monetary policy tightening. This factor even overweighed OPEC+ production cuts.

According to the head of commodity strategy at ING Groep NV Warren Patterson, the U.S. government intends to replenish the country's Strategic Petroleum Reserve. However, this issue will largely depend on the cost of raw materials.

According to the technical analysis, AUDCAD consolidated in a narrow range and is now closer to its lower boundary. Therefore, it is more preferred to open long positions in the currency pair.

The level of $0.910 will be the upside target. It has already acted as a resistance to the price increase several times. Also, the Fibonacci level is at 0.236 of the entire correction wave of the currency pair. Stop-loss can be set at the renewal of the local lows at 0.902.

AUD/CAD currency pair growth:

Take profit – 0.910

Stop-loss – 0.902