The AUD/CAD pair is close to forming of a new downward wave

11 July 2023 137
The AUD/CAD pair is close to forming of a new downward wave

The AUD/CAD currency pair made an attempt to rebound after a long decline. However, the fundamental factors indicate the weakening of the Australian dollar. The Reserve Bank of Australia (RBA) last week kept the key rate at the level of 4.1%. At the same time, most analysts expected another hike of +0.25%. Inflation is close to its peak and will start declining in the coming months. Nevertheless, the central bank is apparently wary of raising the rate further. This could negatively affect the Australian dollar.

 

On Wednesday there will be a meeting of the central bank of Canada officials. Analysts expect a rate hike of +0.25%. However, the situation with inflation in Canada is much better than in Australia. Therefore, the central bank of Canada will probably keep the rate at its current level. It will be more reasonable than the actions of the central bank of Australia. Inflation in Canada is now lower than the borrowings! Thus, the real rate turned positive. Therefore, the pressure on the Canadian dollar will be minimal.

 

The lack of a trade deal between Australia and the EU may also put pressure on the currency.

Their negotiations on a free trade agreement are at an impasse over Canberra's concerns that the bloc is offering insufficient access to the nation’s agricultural exports. Trade Minister Don Farrell is unhappy with the outcome of the latest talks. Farrell said he is prepared to walk away from the negotiations if the EU fails to improve its position. The EU was Australia’s third-largest two-way trade partner worth $65 billion in 2022.

 

According to the technical analysis, the AUD/CAD currency pair rose after the central bank’s meeting in Australia last week. There are some signals of a reversal. The main trigger should be the meeting of the central bank of Canada officials. The currency pair is expected to decline.

The downside target will be the minimum of the last weeks, which corresponds to the level of 0.875. A Stop-loss should be placed at the growth to the April resistance level of 0.894. There is also a strong 0.5 Fibonacci level from the whole downward wave.

 

Decrease in the AUDCAD currency pair:

Take profit — 0.875

Stop-loss — 0.894

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

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