AUDCAD semi-annual high is very close

The AUDCAD currency pair, as expected in the previous forecast, has consolidated above the level of 0.9. By now, the quotes have updated the July high of 0.9055 and are heading towards the June high, just above the level of 0.91. The medium-term uptrend confirms the continued advantage of the Australian dollar buyers over the Canadian currency buyers. Fundamentals also favor further growth of AUDCAD.

Before the holiday weekend, Statistics Canada released the country's GDP data for October. The figures were worse than analysts' expectations: the Canadian economy did not change in October. The consensus forecast suggested a 0.2% increase in GDP. Moreover, the initial economic growth estimate for September worsened from 0.1% to 0%. The released statistics increased the pressure on the Canadian dollar in the currency market.

Traders now estimate the likelihood of an interest rate cut by the Bank of Canada in March at 50%. Almost all market participants are confident in April's easing of monetary policy. Andrew Kelvin, chief Canada strategist at TD Securities, considers the deterioration of the economic situation sufficient enough to start a discussion on cutting interest rates. The Bank of Canada will probably clarify this issue at its next meeting on January 24.

Royce Mendes, managing director of Desjardins, highlights the increasingly negative impact of tight monetary policy on Canadian households and businesses. He expects the economy to be in at least a mild recession in 2024. Canada's GDP is now being kept from declining only by the service sector (+0.1% in October), while the manufacturing sector has been negative in 4 out of the past 5 months.

The next target for AUDCAD bulls should be the level of 0.91. It may be reached as early as in the first days of 2024. The rising trend line and technical indicators, that are far from being overbought, also support further strengthening of the Australian currency over the Canadian one.

Consider the following trading strategy:

Buy AUDCAD at the current price. Take profit – 0.91. Stop loss – 0.898.

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