The AUDCAD currency pair after the growth wave in mid-August started consolidation near the monthly highs. Bears took advantage of the situation, but all attempts to encourage a sharp fall in quotes were limited by the level of 0.912. Market participants are buying back AUDCAD drawdowns, pricing on the continuation of growth after the current lull. First of all, buyers need to take control of the level of 0.92, behind which there are no obstacles up to the summer highs.
In recent days, the Australian dollar has started to strengthen again, supported by inflation data for July. The rate of price growth in the country slowed to 3.5% from 3.8%, but analysts had expected an even bigger drop to 3.4%. At the same time ABS head of prices statistics Leigh Merrington draws attention to the artificial pressure on inflation from new subsidies for electricity from the Australian authorities. Because of them, the cost of electricity fell by 6.4%. Exclusive of subsidies, there is an increase of 0.9%.
Tapas Strickland from the National Bank of Australia doesn’t see enough progress in the fight against rising prices. In his opinion, the country's authorities cannot subsidize the entire list of goods and services that are getting more expensive, and without this, inflation won’t return to the 2% target for a long time. Market participants agreed with this point of view and brought back their bets on the first key rate cut by the Reserve Bank of Australia from November to December.
At the same time, the Bank of Canada is likely to conduct a third easing move at the September 4 meeting. This was predicted by analysts at BofA Global Research, and by the end of 2024, the cost of borrowing in Canada will decline to 3.75%. Only unexpectedly strong statistics on the country's GDP for the second quarter, which will be published today, can prevent this scenario. However, even in this case, the interest rate differential will come over to the Australian dollar's side, supporting the AUDCAD’s growth.
The Stochastic indicator has already given a buy signal for AUDCAD, confirming the development of a new growth wave. The nearest targets for the bulls are 0.92 and 0.923.
The following trading strategy can be suggested:
Buy AUDCAD at the current price. Take profit 1 — 0.92. Take profit 2 — 0.923. Stop loss — 0.912.
This content is for informational purposes only and is not intended to be investing advice.
