Softening RBA rhetoric and yuan influence depress AUDCAD

22 March 2024 57
Softening RBA rhetoric and yuan influence depress AUDCAD

The AUDCAD currency pair is falling on Friday as the sharp weakening of the Chinese currency hits the Australian dollar, which often acts as a proxy for the yuan in the G10. The catalyst for the yuan's decline was the People's Bank of China's decision to cut the daily benchmark rate of the managed currency by the largest amount since early February. The cut sent shockwaves through Asian markets.

 

Meanwhile, the Reserve Bank of Australia (RBA) released its Financial Stability Review on Friday. According to the report, banks are strong and households are resilient to higher interest rates. This provided some support for the Australian currency.

 

The RBA held rates steady on Tuesday at a 12-year high of 4.35% but softened its stance by dropping a warning about further hikes that had appeared in previous monetary policy statements. Markets suggest the first cut could come in August or September.

 

Bank of Canada Deputy Governor Toni Gravelle said the central bank is likely to wrap up its quantitative tightening (QT) program in 2025, later than some analysts have expected.

 

Also on Friday, retail sales data is expected from the Canadian statistical agency.

 

On a technical level, the AUDCAD rate has breached the upward corrective trend of the H4 timeframe.

 

In terms of wave analysis, the price is in the formation of the third bearish wave on the H2 timeframe. A break of the top of the first wave at 0.8830 will strengthen the downward movement. Negative indicators on the Bears Power indicator (standard values) point to a bearish trend.

 

Signal:

Short-term prospects for AUDCAD suggest selling

The target is at the level of 0.8730.

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

A stop-loss could be placed at the level of 0.8930.

 

The bearish trend is short-term, so trade volume should not exceed 2% of your balance.

This content is for informational purposes only and is not intended to be investing advice.

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