AUDCAD successfully recovered all the losses of last week and returned to the local highs near the level of 0.89. The advantage is neither on the sellers' nor on the buyers' side. Nevertheless, the combination of technical and fundamental factors helps the Australian dollar to outperform the Canadian currency.
Yesterday, the Australian Bureau of Statistics published the labor market report for October. The number of people employed in the economy increased by 55K, far exceeding analysts' forecast of 20K and the figures for September of 7.8K. The strong labor market keeps inflation elevated. According to the latest University of Melbourne survey, the Australian population expects a price growth rate of 4.9% over the next 12 months. The rate of expected inflation increased for the third consecutive month.
At the same time, the Canadian economy is feeling far less confident. The data on the housing market could be considered one of the most telling indicators. According to the Canadian Real Estate Association (CREA), in October home sales fell by 5.6% compared to September. The number of transactions fell for the fourth consecutive month and became the lowest in the last year and a half.
Even more negative is the ratio of completed transactions to home listings. CREA estimates the ratio at 49.5%, a 10-year low. Even a 0.8% drop in prices failed to revive the real estate market. An additional blow to the Canadian economy is also caused by the fall in oil prices, which have returned to July levels. In such a situation, it would be difficult for the Canadian dollar to find support.
On the daily chart, the Stochastic indicator lines are gradually approaching the overbought zone, but the potential for further growth of AUDCAD is not exhausted yet. The level of 0.895 is definitely within bulls' reach and could be overcome in the near future.
The following trading strategy can be suggested:
Buy AUDCAD at the current price. Take profit — 0.895. Stop loss — 0.884.
Traders can 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.
