The AUDCAD currency pair is forming a downtrend

05 June 2023 153
The AUDCAD currency pair is forming a downtrend

The world economy is on the verge of recession, interest rates remain high and the dollar is strengthening. All these factors affect the currency market.

 

The U.S. dollar strengthened against major currencies in Asian trading amid Friday's data on U.S. nonfarm payrolls. Overall job growth in May was much higher than expected, wage pressures eased, and the unemployment rate rose from a 53-year low. This implies a tightening of monetary policy by the U.S. Federal Reserve, which is fighting with high inflation.

 

However, some regulators had suggested earlier that rates remain unchanged in June to assess the impact of monetary tightening. The market participants estimate the probability of this scenario at 80%.

 

In that regard, the Canadian dollar, correlated with the U.S. dollar, rose in value.

 

The Australian dollar slightly recovered after Friday's losses as a result of the report, indicating growth in service sector activity in China.

 

China's services Purchasing Managers' index (PMI) rose to 57.1 in May from 56.4 in April, the latest data released by Caixin showed Monday.

 

The Reserve Bank of Australia will announce its interest rate decision at 4:30 a.m. GMT on Tuesday. The rate is projected to stay at the level of 3.85%. Confirmation of the forecast may lower the value of the Australian dollar in the short term. The Ivey Canada Business Activity Index will be released tomorrow evening. This macroeconomic indicator shows the current state and future business conditions in the country. It is one of the earliest indicators to assess the economic situation. The news is going to be published at 14:00 GMT. Confirmation of the forecast of 57.2 may strengthen the Canadian dollar.

 

Currency pair AUDCAD is in a downtrend on the H4 timeframe. Amid Friday's events the currency pair's quotations pulled back from the trend resistance, signaling a further decline.

 

Signal:

The short-term outlook for the AUDCAD pair is to sell.  

The target is at the level of 0.8790.

Part of the profit should be fixed at the level of 0.8830.

A stop-loss should be placed at the level of 0.8915.

The bearish trend is of a short-term nature, so it is suggested to limit the trading volume to no more than 2% of your capital.

This content is for informational purposes only and is not intended to be investing advice.

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