The AUDCAD currency pair continues to move towards the lows of the last Fall. In yesterday's trading session, quotes fell below the level of 0.88 for the first time since November. By Wednesday evening, a significant part of the day's drawdown was bought back, but the medium-term initiative remains with the buyers of the Canadian dollar against the Australian currency. The level of 0.875 may become the next target for the bears.
On the background of yesterday's publication of Australian inflation data, an attempt to bring AUDCAD quotes back to the level of 0.89 was made, but the initial impulse quickly faded. An excessively slow decline in price growth (from 7% to 6.8%, with expectations of 6.4%) may encourage the Reserve Bank of Australia to raise interest rates again at its meeting on June 6, but basically all the other economic statistics are already showing a decline. Therefore, RBA officials should be cautious and take a pause.
The Bank of Canada, along with its Australian colleagues, will also have a meeting regarding monetary policy next week. In this situation, there are more preconditions for an increase of interest rates. In addition to Canadian inflation, which remains stable and is even showing signs of accelerating growth again, the GDP data also exceeded expectations. The economy grew by 3.1% in the first quarter, which looks like a very strong result.
Since the Bank of Canada has already taken a pause and maintains its key rate at the current level of 4.5% since January, a change in its position could cause a powerful strengthening of the national currency. Probably, it is not necessary to tighten the monetary policy for a new wave of decrease in AUDCAD exactly on June 7, the "hawkish" rhetoric of the Canadian officials will be quite enough.
The accumulated oversold on the RSI indicator slightly prevents the strengthening of the Canadian dollar against the Australian currency. Consequently, the rebound of AUDCAD quotes upwards can be observed. At the same time, there is almost no danger for the medium-term downtrend until the price consolidates above the 0.89 level. Within it, the movement to the level of 0.875 will be the next target.
The following trading strategy option can be suggested:
Sell AUDCAD not above the level of 0.89. Take profit – 0.875. Stop loss – 0.895.
This content is for informational purposes only and is not intended to be investing advice.
