This week, the AUDCAD currency pair's wave of decline from the annual highs near the level of 0.938 has stopped and headed upwards. From a technical point of view, the first correction over the month was a necessary step, and now the bulls can increase long positions at more favorable prices. At the same time, the fundamental picture continues indicating the superiority of the Australian dollar against the Canadian currency. Given this, the AUDCAD quotations may quite quickly return to the level of 0.932 and renew the recent highs.
According to HSBC analysts, the monetary unit of Australia is currently one of the best choices in the currency market. This is mainly related to the large-scale measures taken by China to stimulate its economy, from which Australian exporters may also gain significant benefits. In addition, the Reserve Bank of Australia keeps refusing to cut interest rates, while the vast majority of regulators in other countries are already actively easing their monetary policies.
The HSBC experts discourage traders from actively buying the Australian dollar against its American counterpart because of uncertainties about the Fed's further steps. At the same time, the Australian currency will show strength in pairs with almost all other monetary units. This is especially true for the currencies of the countries already experiencing economic recession and reducing the cost of borrowing. One of the most obvious examples of this category is the Canadian dollar.
According to Reuters analysts, the Bank of Canada will cut its key rate for the 4th consecutive time at its October 23 meeting. At the same time, Paul Beaudry, a former official of the regulator, calls for monetary policy easing by a more radical step of 0.5%. He estimates that the September labor market report released today will show a further rise in Canadian unemployment to a three-year high of 6.7%. Beaudry believes that the Canadian central bank needs to bring the rate to the neutral level of 2.75% as soon as possible and thus support the economy.
The Stochastic indicator on the daily chart of AUDCAD confirms the price upward reversal. The nearest target for buyers is the 0.932 level.
The following trading strategy may be suggested:
Buy AUDCAD at the current price. Take profit – 0.932. Stop loss – 0.92.
This content is for informational purposes only and is not intended to be investing advice.
