The downward trend of the AUDCAD currency pair has accelerated relative to the last few months. In general, this is not surprising in light of the strong growth of oil prices in the world.
The strengthening of the Canadian dollar may continue, due to the positive outlook for the oil market. It is not worth expecting $100 per barrel, and certainly not $120. However, these views support the Canadian currency.
According to the interview with Mike Wirth, Chevron CEO, oil prices may soon reach the $100 mark due to supply cuts.
The price of West Texas Intermediate (WTI) is close to the level of $90 per barrel, due to the decrease in oil production by Russia and Saudi Arabia. At the same time, the price of Brent crude has already exceeded this value.
Strategists of JPMorgan said that the price of Brent crude oil may rise to $120 per barrel because of supply reduction. If this happens, the world economy could start to slow down significantly.
Experts note that oil prices have risen 27% in the past two months to a 10-month high. They attribute about a quarter of this growth to an unexpected increase in demand for oil, and the other three quarters are caused by a significant supply reduction.
The latest data on inflation in Canada also support the Canadian dollar. Statistics show its growth up to 4%. Analysts expected a more modest increase to 3.8%. The statistics push the authorities to tighten monetary policy.
Recently, the regulator expressed its opinion on the key rate. At the last meeting, policymakers considered the possibility of additional rate tightening. They also highlighted their concerns about the sustainability of core inflation. For now, the Bank of Canada has decided to hold off on a rate hike. However, the latest inflation data may push them towards such a move.
According to the technical analysis, the AUDCAD currency pair is in a descending wedge. In the light of the Bank of Canada's recent reports and the dynamics of oil prices, we should expect further strengthening of the Canadian dollar.
The downside target is the lower boundary of the wedge, which corresponds to the price of 0.86. Stop-loss should be placed in case of breaching the upper boundary of the figure. This is the level of 0.87.
The AUDCAD currency pair is likely to decline:
Take profit – 0,86
Stop-loss – 0,87
This content is for informational purposes only and is not intended to be investing advice.
