AUDCAD correction is interesting for taking long positions

The AUDCAD currency pair experienced a sharp rise in volatility during Thursday's trading session. Quotes managed to renew the six-month high just below 0.906 before massive profit taking caused a powerful pullback downwards. The price returned under the level of 0.9 and now tries to determine the further direction of movement. From a fundamental point of view, the correction opens an interesting opportunity to build up long AUDCAD positions.

Yesterday's labor market statistics for November contributed to the strengthening of the Australian dollar. According to the results of the past month, the number of employed in Australian economy jumped by more than 60 thousand people. This is the best result for 3 months, moreover, it far exceeded analysts' forecast with the value of just 11 thousand. The record inflow of migrants and students increased the supply to meet the demand for workforce.

Callam Pickering, Asia-Pacific regional economist at Indeed Inc. noted the continued resilience of Australia's labor market. He reported a still high number of vacancies, typical for most sectors of the economy. In his view, a rise in unemployment to a one-and-a-half year high of 3.9% means more Australians are looking for work, rather than a sign of weak demand from employers.

Given the strength of the labor market, traders are very cautious about forecasts for the level of interest rates in Australia. Now, market expectations are focused on just 2 steps of the Reserve Bank of Australia (RBA) to reduce the key rate next year. Last week, RBA Governor Michelle Bullock signaled the possibility of easing monetary policy no earlier than mid-2024. The moderately hawkish position of the RBA will support the Australian dollar.

The nearest target for the bulls on AUDCAD is to regain control of the level of 0.9. Further upward movement can bring quotes to the level of 0.903. Chances of updating multi-month highs remain strong as long as the price holds above 0.89.

The following trading strategy may be offered:

Buy AUDCAD at the current price. Take profit 1 – 0.9. Take profit 2 – 0.903. Stop-loss – 0.89.

Also, traders can use a Trailing Stop instead of a fixed Stop-loss at their discretion.