The AUDCAD pair updated the annual high several times during Wednesday and Thursday trading sessions. However, if Wednesday's upward movement was very confident, yesterday ended with a sharp pullback. Forex market participants switched to selling when the price rose above the 0.91 level, noting the limit of the current wave of growth. The bears may start a full-fledged AUDCAD correction with the first target at 0.905.
Traders were generally positive about the Australian labor market report, although the detailed study of the data showed it was not so favorable. The unemployment rate rose from 3.9% to 4.1%. Analysts had expected no change in this indicator. The total number of people employed in the economy grew by an impressive 38.5 thousand. However, all the growth was provided by part-time workers. Excluding them the indicator fell by 6.1 thousand.
Reuters analysts also keep an eye on Australian wages data. The growth rate of the indicator slowed from 4.2% to 4.1%, and the private sector economy recorded a contraction for the first time since Q3 2020. This rekindled hopes that the Reserve Bank of Australia (RBA) will cut interest rates for the first time by the end of this year. The probability of monetary easing rose to 54% from 40%.
Bloomberg specialists note that hedge funds are pessimistic about the Australian dollar. Despite last month's rally, money managers are keeping their short positions at two-year highs. Negative economic data from China, Australia's largest trading partner, is the main risk. The release of such news may cause a sharp pullback in AUDCAD.
The daily chart's RSI indicator for AUDCAD is floating near the overbought territory, indicating an impending reversal and correction. In this case, the pair will tend to the 0.905 level, and then the 0.9 mark may be tested.
Consider the following trading strategy:
Selling AUDCAD at the current price. Take profit – 0.905. Stop loss – 0.912.
Traders may also use a Trailing stop instead of a fixed Stop loss at their discretion.
This content is for informational purposes only and is not intended to be investing advice.
