In the first half of the week, the AUDCAD currency pair actively bounced from the annual minimum of 0.862. On Wednesday, we saw a strong upward momentum. The pair hit the 0.877 level. Yesterday’s corrective pullback could not completely reset the entire growth of the previous days, although it slightly reduced buyers’ optimism. The bulls still have a good chance to get closer to 0.877.
A strong fall of the Canadian dollar was facilitated by the release of statistics on retail sales. The basic indicator, which does not include the motor vehicle market, unexpectedly declined by 0.8%, while the forecast of moderate growth was 0.3%. That was the largest drop in retail sales since last fall. The data provided further evidence of a slowdown in the Canadian economy and accelerated the recovery of AUDCAD.
The poor retail sales data led to an immediate revision of forecasts on the Bank of Canada's future actions. The probability of raising the key rate at the meeting on September 6 fell from 27% to 18%. Jay Zhao-Murray, an analyst at Monex Canada, believes that further monetary tightening is unnecessary. In his opinion, the slowdown in economic growth will bring inflation down to the Canadian regulator's target of 2%.
CEO of the National Australia Bank (NAB) Ross McEwan expressed confidence in the stability of consumer demand. NAB, one of the largest banks in Australia, is seeing a very small increase in overdue loans. This is supported by the country's low unemployment rate, which has slightly risen from a historic low of 3.4% to 3.7%.
As long as AUDCAD quotes do not fall below 0.867, the most likely scenario will be a new wave of growth. The targets will be the levels of 0.875 and 0.877. If Monday’s statistics on retail sales in Australia meets the expectations, the chances of reaching these targets will increase significantly.
We may offer you the following trading strategy:
Buy AUDCAD in the range of 0.87-0.872. Take profit 1 – 0.875. Take profit 2 – 0.877. Stop loss – 0.867.
Also, traders can use a Trailing Stop instead of a fixed Stop-loss at their discretion.
This content is for informational purposes only and is not intended to be investing advice.
