AUDCAD rises amid lower oil prices

06 October 2023 116
AUDCAD rises amid lower oil prices

The AUDCAD currency pair is making a reversal amid the correction in oil prices. The oil dynamics is an important factor for the Canadian dollar. If commodity prices stabilize at the current level, it will be negative for the Canadian currency.

The oil market is expected to witness the sharpest weekly decline since March. It was driven by the hawkish stance of the U.S. central bank. Maintaining high interest rates for an extended period of time may slow down economic growth and reduce demand for energy products.

Investors' concerns about rising government spending and budget deficits in the U.S. led to a sharp sell-off in the debt market. Treasury bonds fell to a 17-year low. This added to worries about a slowdown in the global economy.

The OPEC+ meeting was also held this week, and the alliance did not change its current oil production policy.

The U.S. data indicated lower gasoline demand and a slowdown in the services sector. Today investors' attention will be centered on the country's monthly jobs report, while next week they will be focused on the U.S. Consumer Price Index and China's economic data.

Global central banks continue to struggle with rising consumer prices. Food inflation in Canada is lower than in many other developed countries, including the UK, Australia, and France. In the coming months, it might fall further as costs on raw materials begin to decline.

This means that the Bank of Canada is likely to be among the first central banks to start a rate cut cycle. This process will cause the Canadian dollar to weaken.

Oil prices should also be closely monitored. Recession in the U.S. economy is inevitable, so oil prices will decline further and will not rise above the level of $100. This process may have already begun.

According to the technical analysis, the AUDCAD currency pair is reversing from its local lows. The nearest growth target will be the upper limit of the downtrend, which has started early in the year. It corresponds to the price of 0.88. A Stop loss will be set at the update of yesterday's low at 0.867.

AUDCAD is likely to rise:

Take profit – 0.880

Stop-loss – 0.867

This content is for informational purposes only and is not intended to be investing advice.

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