On Friday, the Australian dollar nursed small losses after the release of U.S. inflation data and weak data from China.
The U.S. consumer prices rose 3.7% in September 2023 from a year earlier. Inflation remained at the level of August. The consensus forecast presented by Trading Economics suggested a slowdown in growth to 3.6%.
Energy prices in September fell by 0.5% year-on-year. Food prices increased by 3.7%, new car prices rose by 2.5%. The cost of transportation services increased by 9.1%.
These indicators alerted the market participants who believed that U.S. interest rates would not rise again after recent statements by Federal Reserve (Fed) officials.
U.S. Treasury yields resumed rising, while the dollar remained at the same level.
Futures are still pointing to a possible pause from the Fed in November, but they are now factoring in the probability of a 40% rate hike in December.
The Australian currency is often traded as a substitute for the Chinese yuan, due to the country's economic dependence on China.
Consumer inflation in China remained at the same level in September, while lower manufacturing prices continue putting pressure on the economy. Export and import data show a decrease, albeit at a slow pace.
Australian 10-year government bond yields surged 11 basis points to 4.486%. This implies an even chance that the Reserve Bank of Australia (RBA) could make one last rate hike early next year. This somewhat supports the Australian dollar.
Meanwhile, there are some obstacles for the growth of the Canadian dollar due to the unstable situation on the oil market. This raw material is the main export commodity of Canada.
On the chart, the AUDCAD is forming a correction corridor on the H4 timeframe. The price tested the strong support at 0.8600, but failed to consolidate below it.
From the point of view of wave analysis, the price is forming the second wave of decline. The AUDCAD's approaching to strong support may create conditions for price reversal and formation of a new upward wave.
Signal:
The short-term outlook for AUDCAD is to buy.
The target is at the level of 0.8810.
Part of the profit should be fixed near the level of 0.8740.
A Stop loss should be placed at the level of 0.8545.
The bullish trend is of a short-term nature, so it is recommended to limit the trading volume to no more than 2% of your capital.
This content is for informational purposes only and is not intended to be investing advice.
