AUDCAD gains on potential easing of trade tensions between US and China

On Friday morning, the AUDCAD currency pair is rising, extending yesterday’s upward move amid a potential easing of trade tensions between the US and China. The opening price was 0.88631.

Trade relations between China and the US have a significant impact on the currency pair’s dynamics. Better communication between Beijing and Washington could strengthen the Australian dollar, since Australia’s close trade ties to China make the AUD sensitive to positive shifts in trade talks between the world’s leading economies. 

The AUD is also supported by the local government’s policy of economic diversification. It helps Australia experience less negative impact despite trade tensions and slowing global economy. Meanwhile, Canada is facing the risk of a recession.   

The US trade policy remains a key driver for both Canadian and Australian dollar dynamics. Any signal of easing trade tensions could strengthen both currencies, although the extent of their reaction may differ due to the specific economic models of the two countries.

The next important event is the release of Canadian retail sales data on April 25. In case of worse-than-expected results, the Canadian dollar may weaken, which contributes to AUDCAD strengthening. 

The technical analysis suggests prospects for growth of the currency pair. The EMA (20) is below the current price, pointing to a weak uptrend. At the same time, the EMA (50) remains above the current price, creating a resistance zone. Divergence between the EMA (20) and EMA (50) is reducing, which may signal a bullish trend shift. 

The MACD indicator is negative. However, the difference between the MACD line and the signal line is decreasing, which may predict a correction or further sideways movement.

The RSI (14) is at 73, signaling that the market is close to overbought territory. However, given that the RSI has not reached the critical level (80) yet, the upward move can extend, but with less power. 

One should keep an eye on the level of 0.894, which marked the shift to a downtrend. If the price pushes back from the level and turns downwards, the AUD will be under more pressure and the downtrend will be confirmed.

Current recommendation: 

Buy at the current price. Take profit – 0.903. Stop loss – 0.88.