AUDCAD continues to recover

03 November 2023 140
AUDCAD continues to recover

On Thursday, the AUDCAD currency pair quotes rose to 0.89 for the first time since the end of July. The pair failed to consolidate at this level, but the pullback did not lead to a breakdown of the local uptrend. After profit taking by traders, strengthening of the Australian dollar against its Canadian equivalent is highly likely to continue. In the near future, the bulls will surely try to test the strength of the level of 0.89 once again.


Almost all of the world's leading central banks have already completed their rate hike cycle. However, one of the regulators may still go for an additional tightening of monetary policy. At least, this is the step that representatives of the International Monetary Fund (IMF) expect from the Reserve Bank of Australia (RBA). According to the IMF, the current level of interest rates in Australia is not enough to beat inflation, especially in the real estate sector.


IMF officials' statements have significantly changed the expectations of market participants. Now 90% of traders predict the RBA key rate increase by 0.25% to 4.35% at the end of the meeting on November 7. According to a poll by Reuters, 15% of respondents also predicted a December rate hike, up to 4.6%. Taylor Nugent, senior economist at NAB, noted the RBA's overly optimistic inflation expectations. The Australian regulator will now have to catch up while other central banks may hold pause.


The Bank of Canada is one of those regulators, having left its key rate unchanged last week. The latest data on the state of the country's economy confirms the correctness of this decision. Business activity in Canada's industry in October was once again below the 50 mark, although the PMI value increased from 47.5 to 48.6. At the same time, the index of future production fell to the lowest since May 2020. All of this suggests that the Canadian dollar will weaken.


As long as AUDCAD quotes remain within the current uptrend, the main scenario is the continuation of growth. The nearest target of buyers is a return to the 0.89 mark.


Consider the following trading strategy:


Buy AUDCAD at the current price. Take profit - 0.89. Stop loss - 0.879.


Traders may also use a Trailing stop instead of a fixed Stop loss at their discretion

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

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