AUDCAD may grow further amid pessimistic statistics from Canada

AUDCAD is growing steadily this week. From Monday to Friday, the opening price has risen 0.83%. On Friday, the opening price was 0.90601.

The currency pair has strengthened due to growing inflation in Canada. Inflation in Canada is gaining momentum, having reached 1.9% in January, compared to 1.8% last year. Energy price was the main driver of such growth, although temporary tax relief helped moderate the rise in food and restaurant costs. Excluding the gasoline price, core inflation rose 1.7%. The monthly increase was 0.1%. Such dynamics combined with a steady labor market makes a monetary easing by the Bank of Canada in March less possible. Additional uncertainty comes from the continuing threat of the US imposing 25% tariffs on Canadian goods, which could lead the country’s financial regulator to pause its decision-making. 

The signals from Australia are also mixed. The country's central bank administration is closely monitoring the labor market, which is performing strongly but could slow disinflation. Governor Michele Bullock highlights the need for a flexible approach to economic data analysis and risk assessment. The currency markets have adjusted their expectations of rate cuts. Only one rate cut is being forecast, instead of four cuts earlier. This has a positive effect on the Australian dollar, which is strengthening among the major world currencies.

The next important event will be the Friday’s release of Canada retail sales and speech by Bank of Canada Governor Tiff Macklem. The retail sales are expected to have zero dynamics compared to the previous level. The market is also to react to the upcoming release of Canada GDP (MoM) scheduled for February 28. It is forecast to decrease by 0.2%. Such a negative forecast may add pressure to the Canadian currency, which is likely to support the growth of AUDCAD until the end of the month.

According to the technical analysis, the currency pair has a potential for further growth. The MACD indicator suggests an uptrend, although the rise has decelerated recently. The RSI is fluctuating in the range of 40–60, which indicates the absence of a definite trend. Overall, the RSI is in the neutral zone. Macroeconomics suggest selling.

Current recommendation: 

Buy at the current price. Take profit – 0.91348. Stop loss – 0.89584.