AUDCAD breaks support level of 0.885 and moves downward

On Thursday's trading session, the AUDCAD currency pair showed the strongest decline since the beginning of February. Quotes broke through the important level of 0.885 and rushed down to the next level of support at 0.881. Here the downward movement has stopped, but at any moment the bears can renew the pressure on the price. If the level of 0.881 also fails to hold, it will open the way to the level of 0.877 and the low of last winter.

Stimulus to the sharp strengthening of the Canadian dollar was the publication of data on GDP. In January, the Canadian economy grew by 0.6%, which was the best result for the last year and exceeded analysts' forecast of 0.4%. Preliminary statistics for February also shows a strong development of the economy and GDP growth by another 0.4%. Probably, the Bank of Canada, underestimated the real situation, while forecasting economic growth in the first quarter at the level of 0.5%.

Andrew Grantham, senior economist at CIBC, sees the GDP data as a clear indication that there is no urgent need to cut interest rates. Doug Porter, chief economist at BMO Capital Markets, has a similar view. In his opinion, the Bank of Canada will raise its economic growth estimate for 2024 at its next meeting on April 10, and will also worsen its inflation forecast. This may postpone the moment of the first easing of monetary policy.

At the same time, Australian statistics were far from positive. In February, retail sales grew by only 0.3%, which was worse than the forecast of 0.4%. At the same time, the indicator was supported by one-off events in the field of sports and music. Excluding these, retail sales rose by a minimal 0.1%, as Ben Dorber of ABS said. He also drew attention to the continued decline in the number of vacancies in the labor market, which is clearly not helping to boost household spending.

Short-term dynamics of AUDCAD will depend on the outcome of the struggle for the support level of 0.881. Its breakdown may lead to a new wave of sales and quick achievement of the level of 0.877.

The following trading strategy may be offered:

Sell AUDCAD below the level of 0.881. Take profit – 0.877. Stop-loss – 0.885.

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