Technical analysis suggests AUDCAD decline

On Friday, the AUDCAD currency pair shows a moderate decline ahead of the New Year holidays.

The Reserve Bank of Australia's (RBA) latest monetary policy minutes showed that the central bank is increasingly confident of a sustained decline in inflation towards the 2% target. However, recent growth in household spending and labor market tensions may complicate this process. Market participants expect the RBA to start cutting interest rates no earlier than the second quarter of 2025. At the same time, the easing cycle is likely to be moderate.

The situation in Canada looks less stable. Preliminary data for November indicate a 0.1% month-on-month decline in GDP. This was the first decline for the current year, confirming the Bank of Canada's previous fears of an economic slowdown and the government's lowering of GDP growth forecasts. The forecast for 2025 was revised down to 1.7% from 1.9% and for 2026 to 2.1% from 2.2%. These expectations increase the possibility of further monetary policy easing by the central bank. This could create additional pressure on the Canadian dollar due to the growing interest rate gap with the US.

In general, the AUDCAD currency pair remains under the influence of the difference in expectations on the monetary policy of the two countries. The tougher stance of the RBA compared to the expected easing by the Bank of Canada supports the Australian dollar. However, technical indicators point to a possible decline in the short-term.

From a technical point of view, the formation of a new downward trend is observed on the daily chart of AUDCAD pair. The price has gone out of the ascending channel, signaling a possible continuation of the corrective downward movement. In addition, Moving Average of Oscillator indicator (parameters 12, 26, 9) is in the negative zone, confirming the strengthening of the bearish sentiment.

Short-term prospects for AUDCAD suggest selling with the target of 0.8830. Part of the profit should be taken near the level of 0.9050. 

Since the bearish trend is short-term, the trading volume should not exceed 2% of your total balance to reduce risks.