AUDCAD is being influenced by the Australian inflation and the Bank of Canada's decision

27 October 2023 101
AUDCAD is being influenced by the Australian inflation and the Bank of Canada's decision

The AUDCAD currency pair is rising on Friday, approaching the highs of October.

 

The Australian inflation data released on Wednesday surprised market participants with its dynamics and raised expectations of a possible interest rate hike in November. The consumer price index for the third quarter rose 1.2%, accelerating from 0.8% for the previous three months. This increase was due to higher fuel and energy prices. Although annual inflation fell from 6.0% to 5.4%, it was still higher than the expected 5.3%.

 

Monthly data also showed that inflation accelerated to 5.6% in September, up from 5.2% in August and 4.9% in July. This looks like a dangerous and persistent upward price trend, although it isn’t yet seen in the quarterly figures that inform the Reserve Bank of Australia's actions.

 

Among other events, on Wednesday, the Bank of Canada decided not to change its key interest rate, leaving it at 5% on an annualized basis. This is the highest level since 2001. The decision matched market expectations.

 

The Canadian regulator did not tighten monetary policy in the context of deteriorating economic activity and rising prices, caused by previous actions of the bank. However, the central bank noted that inflation still hasn’t reached the target level of 2%, and therefore the regulator does not rule out raising rates in the future.

 

It is also worth noting that the Bank of Canada lowered its GDP growth forecast for the current year from 1.8% to 1.2%. Now it expects a further slowdown to 0.9% in 2024. Against this backdrop, the Canadian dollar started to depreciate.

 

The scenario for the AUDCAD pair could include strengthening of the Australian dollar amid expectations of rate hike in Australia and weakening of the Canadian dollar due to more cautious monetary policy of the Bank of Canada and negative forecasts on the economy.

 

In terms of wave analysis, the price of the AUDCAD pair is forming the third ascending wave on the M30 timeframe. Breaking through the top of the first wave at 0.8785 will strengthen the upward price movement.

 

Signal:

The short-term outlook for the AUDCAD pair is to buy.

The target is at the level of 0.8910.

Part of the profit should be fixed near the level of 0.8810.

A Stop-loss should be placed at the level of 0.8660.

The bullish 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.

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