The AUDCAD pair took a short pause last week and began to update the current year’s lows again. Yesterday, the quotations didn’t reach the October 2022 bottom — the level of 0.86. Now we see the bulls aspire to create an upward rebound of AUDCAD, but it is unlikely to last long. The initiative may return to the sellers in the range of 0.872–0.875. Moreover, the fundamental factors of the price movement are on their side now.
This week, the first trigger of the AUDCAD decline was the statistics on inflation in Canada. The annual price growth rate in July remained at the same level of 3.2% (it was expected to fall to 2.8%). Monthly inflation accelerated sharply from 0.1% to 0.6%, with a forecast of 0.3%. These figures are unlikely to force the Bank of Canada to increase the key rate more, but at least they make irrelevant talk of a possible easing of monetary policy in the coming months.
In turn, the Australian dollar came under serious pressure yesterday after the release of July labor market data. The unemployment rate rose from 3.5% to 3.7% (a minimal increase of 0.1% was expected). But the loss of 14.6 thousand jobs in the Australian economy is an even more important sign. These data may indicate a full-fledged reversal of the national labor market toward reduction in employment.
Considering such negative statistics, the Reserve Bank of Australia now has no possibility for further increase of rates. According to Bloomberg analysts, the monetary policy tightening cycle has already been completed in Australia. The Australian dollar has already fallen by more than 5% over the past month because of these forecasts. It showed the worst dynamics among all currencies of developed countries. There are no preconditions for a reversal of this trend.
The apparent downside target for AUDCAD is the last year’s lows near 0.86. The current upward bounce is a good opportunity to open short positions.
We may offer you the following option of trading strategy:
Sell AUDCAD when the price rises to the range of 0.872 – 0.875. Take profit 1 — 0.863. Take profit 2 — 0.86. Stop-loss — 0.878.