AUDCAD rebound has chances to continue

10 August 2023 151
AUDCAD rebound has chances to continue

Last week the AUDCAD currency pair updated its lows reached in November last year. The bulls probably regarded the level of 0.87 as a good starting point for the prices to rebound upwards. The upward movement did start, but the price settled rather quickly at the level of 0.882 and the downtrend line from the July peak. However, the price did not resume falling and now it is consolidating in the range of 0.875-0.882. There are still good chances of climbing once again to the upper boundary of this range.

 

The current week was not marked by a lot of important statistics on the economies of Australia and Canada. Nevertheless, one important indicator was published. The presented figures on the trade balance of Canada allow us to expect some weakening of the national currency of this country.

 

By the end of June, the trade balance deficit amounted to 3.73 billion Canadian dollars (2.77 billion U.S. dollars). The data did not meet expectations of a more modest deficit and turned out to be the worst in almost 3 years. That said, the Canadian deficit, excluding trade with the U.S., hit a new all-time high in recorded history.

 

Olivia Cross from Capital Economics noted the negative impact on Canada's trade balance from lower exports, primarily metals and other raw materials. She estimated that weakened global demand led to a slowdown in national GDP growth from 3.7% in the first quarter of the year to 1-1.2% in the second quarter. The outlook also remains unfavorable for the second half of 2023.

 

Meanwhile, the Australian dollar is under pressure caused by economic problems in China, Australia's largest trading partner. At the same time, the summer season of lower business activity is coming to an end, and starting from September the manufacturing sector of China should accelerate the pace of development. This may support the rate of the national currency of Australia and lead to growth in AUDCAD.

 

The Stochastic indicator continues to grow, confirming the AUDCAD buy signal. The overbought zone is still distant, which means that technically there is hardly anything preventing the price from reaching the level of 0.882 once again.

 


Consider the following trading strategy:

 

Buy AUDCAD at the current price. Take profit – 0.882. Stop loss – 0.875.

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

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