The AUD/CAD currency pair rose significantly last week. This movement is rather surprising, as there were several factors behind the growth of the Canadian dollar.
Canada's central bank raised the rate to 5% in line with analysts' forecasts. However, there were expectations that the regulator would take a pause as inflation in the country is under control. Nevertheless, the rate hike did not contribute to the growth of the Canadian currency. Another factor for the Australian dollar’s decline was the expected consumer price growth data. Inflation in the next 12 months in Australia will be 5.2%. Analysts projected 5.1%. The higher the inflation rate is, the more the currency depreciates in the medium term.
Canadian inflation data will be released today. Analysts suggest a decrease in the price growth pressure to 3% compared to last year. However, the core index will rise to 0.5% against May. The final figures are likely to be better than expected, which may lead to the growth of the Canadian dollar.
China's slowing economic growth is concerning for Australia, Treasurer Jim Chalmers said. China is Australia's largest trading partner. It accounts for just under one-third of the country's exports, making it dependent on weakness in the world's second-largest economy.
China's recovery lost momentum in the second quarter, increasing by just under 1% from the previous three months. Beijing's growth target for the year is at risk. Data released on Monday showed that deflation is now a serious threat.
Such GDP data has intensified calls for additional stimulus. Investors' attention is now focused on the Communist Party Politburo meeting later this month, which will set economic policy for the rest of the year.
Weak economy may lead to the weakening of the Australian dollar.
According to the technical analysis, the AUD/CAD currency pair is reversing from the resistance level, which was formed since the beginning of the year. The downside target will be the level of 0.883. There is the start of last week's growing momentum and the support level. A Stop-loss will be set when the highs are updated and the downtrend is broken, which corresponds to the level of 0.906.
The AUDCAD currency pair is likely to decline:
Take profit – 0.883
Stop-loss – 0.906
This content is for informational purposes only and is not intended to be investing advice.
