The AUDCAD pair is in a broad correction. Markets’ volatility is slowing down as traders prepare for the expected interest rate hike and signals on the future course of monetary policy from the major central banks in the next two days.
Markets fully expect an interest rate hike of 25 basis points from U.S. and European regulators. Therefore, speeches from Federal Reserve (Fed) Chairman Jerome Powell and President of the European Central Bank (ECB) Christine Lagarde will be in focus. They may shed light on the future direction of monetary policy.
A survey of purchasing managers published on Monday showed a slowdown in U.S. business activity and a stronger contraction in European activity in July. This could imply the end of monetary policy tightening by the Fed and ECB.
Meanwhile, the dollar index reached an almost two-week high. The Canadian dollar (CAD) correlating with the U.S. dollar (USD) also strengthens in cross-rates.
The Bank of Canada won’t raise rates again and will start cutting them a little later.
A survey conducted by the Bank of Canada from June 8 to June 19 showed that economists in the Canadian financial markets don’t expect further tightening of monetary policy. They believe the Bank of Canada will hold the interest rate at a 22-year high of 5.00% until the end of 2023 and then begin to cut rates in March.
The median share of survey participants forecast a key rate cut to 3.50% in the fourth quarter of 2024.
The current interest rates of the Canadian regulator support the national currency rate.
AUDCAD quotations are out of the upward corrective trend on the H4 timeframe.
In terms of wave analysis, the price forms the third descending wave on the H2 timeframe. The breakthrough of the first wave top at 0.8895 has already happened. The downward movement may increase in the near term. The next support is at 0.8840.
Signal:
Short-term prospects for AUDUSD are selling.
Target is at the level of 0.8765.
Part of the profit should be fixed around the level of 0.8840.
Stop-loss is around the level of 0.8985.
The bearish trend is short-term, so choose a trading volume of no more than 2% of your balance.
This content is for informational purposes only and is not intended to be investing advice.
