The AUDCAD currency pair is now correcting significantly due to the similarity of monetary policies of the Reserve Bank of Australia and the Bank of Canada along with the influence of the US dollar and the Chinese currency.
The US currency is holding its position at a 10-month high against major currencies due to strong government bond yields and the prospect of a rate hike in the US. This also strengthens the Canadian dollar in correlation with the neighboring country's currency.
On Tuesday, the president of the Federal Reserve Bank of Minneapolis Neel Kashkari said there is a 40% chance of a significant interest rate hike by the regulator to fight inflation.
Yuan trading volumes are collapsing before the Golden Week holiday as the central bank’s tightening grip on the currency. It reduces the room for traders to place directional bets.
The amount of dollar-yuan transactions slid below $10 billion Monday and was just $12 billion on Tuesday. This is far below the daily average of about $30 billion over the past year. The nation’s financial markets are shut from Friday and only reopen Oct. 9.
Trading levels are falling as the People’s Bank of China seeks to push back against the weakening trend for the currency by keeping its daily fixing in a narrow band despite the strengthening dollar.
This dynamic affects the pricing of the Australian currency, as China is its main trading partner.
On Thursday, the Retail Sales Index in Australia is going to be published. This indicator represents the volume of sales of goods and services to final consumers for a certain period of time. Together with GDP, inflation and unemployment rate, retail sales are among the most important macroeconomic indicators. The figures are expected to remain at 0.5%. Any deviation from the forecast may increase the price volatility in the AUDCAD pair.
The AUDCAD chart shows the formation of a downward corrective channel on the H4 timeframe.
The RSI indicator (standard values) shows convergence. This indicates the continued formation of a downward correction.
Signal:
The short-term outlook for the AUDCAD pair is to sell.
The target is at the level of 0.8525.
Part of the profit should be fixed near the level of 0.8585.
A Stop-loss should be placed at the level of 0.8695.
The bearish trend is of a short-term nature, so it is suggested 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.
