The AUDCAD currency pair updated the price low of mid-November at the trading session on Thursday. The price has reached the level of 0.876, and today the pair is rebounding upwards from this point. Nevertheless, the downtrend starting from the December top at 0.906 remains strong, and the bears may regain the initiative very quickly. There are both technical and fundamental conditions for this to happen.
The pressure on the Australian dollar increased after the publication of inflation data for Q4 2023. Price growth slowed from 5.4% to 4.1%, which was better than analysts' consensus forecast of 4.3%. After the release of statistics, Barclays representatives moved the expected date when the Reserve Bank of Australia starts reducing the key rate from Q4 to Q3 of this year. Expectations of market participants are even more optimistic - they predict the easing of monetary policy as soon as in May.
At the same time there are signals for the Bank of Canada that the current level of interest rates should be maintained. GDP data for the 4th quarter reflected the national economy growth of 1.2%. Thus, a recession was avoided: a bumpy end of the year offset the GDP decline in the period from July through September. Doug Porter, chief economist at BMO Capital Markets, noted the positive impact of sustained economic growth in the U.S., allowing Canada to increase exports to the neighboring country.
Yesterday's release of business activity indices confirmed the turnaround. PMI in the Canadian industry rose from 45.4 to 48.3 points. At this rate, the index may return above the key mark of 50 points in the coming months. Canadian companies are also expecting better business conditions: the future manufacturing index rose to 61.9 points, setting a six-month high.
AUDCAD's upward rebound at the end of January helped to eliminate the oversold condition of the RSI indicator. Now it does not prevent a new decline in quotes. The nearest target of sellers on the daily chart is a repeated descent to the level of 0.876.
Consider the following trading strategy:
Selling AUDCAD at the current price. Take profit - 0.876. Stop loss - 0.885.
Traders may also use a Trailing stop instead of a fixed Stop loss at their discretion