The AUD/CAD currency pair has reached its downside targets, which were outlined two weeks ago. On the background of the latest rise in oil prices, our analysts believe that the strengthening of the Canadian dollar may continue in the coming days.
Previously, the Canadian dollar ignored the oil price movement. However, everything changed when oil prices broke out of the sideways range. Its growth potential has not been exhausted yet, so it is possible that the AUD/CAD currency pair will continue to decline.
After being in a narrow range for most of the second quarter, oil prices started a significant rally in July.
According to commodity analysts at Standard Chartered, oil market participants have realized that the fundamentals have tightened considerably. Experts predict that seasonal demand growth combined with oil producers' cuts will lead to a large supply deficit in the coming months.
According to StanChart's demand model, the supply deficit will be 2.81 million bpd in August, 2.43 million bpd in September and more than 2 million bpd in November and December. Analysts also forecast global inventories to fall by 310 million barrels by the end of 2023 and by another 94 million in the first quarter of 2024. This will help to boost oil prices.
No important data for this currency pair are expected in the coming days. The general picture remains the same. Canada’s inflation data is positive, so the government may soon start stimulating economic growth. At the same time, GDP growth meets the expectations, and there is no recession in the country.
In turn, data on consumer price growth in Australia meets the expectations. At the same time, inflation in the country is higher than the key rate, which forces the central bank to continue tightening policy.
According to the technical analysis, the AUD/CAD currency pair has consolidated below the 0.618 Fibonacci level from the last wave of growth. Now there is a chance of reaching the local minimums.
The downside target will be the level of 0.874. In case of growth, a Stop-loss should be placed above the nearest Fibonacci level, which corresponds to the price of 0.887.
Decrease in the AUDCAD currency pair:
Take profit — 0.874
Stop-loss — 0.887