AUDCAD is completing its correction phase and may soon retest 0.9 level

The AUDCAD currency pair began the week by retesting the 0.9 resistance level, but subsequently experienced a sharp rejection from this zone. Prices declined below 0.89, where bulls resumed buying the Australian dollar against its Canadian counterpart. During Friday's trading session, the pair is showing upward momentum. If AUDCAD closes the week above 0.89, there will be strong potential for a return to the 0.9 level before month-end.

The Australian dollar began weakening on May 20 following the central bank's decision to cut its interest rate. While Reserve Bank of Australia (RBA) Governor Michele Bullock adopted a more dovish tone, Bloomberg Economics analysts caution against overstating the significance of the regulator's move. Although Australia's economy shows signs of cooling, tight labor markets and persistent housing inflation continue limiting the scope for active rate reductions.

This position was reinforced yesterday by RBA Deputy Governor Andrew Hauser. He stated that Australia's economic growth forecasts remain unchanged despite uncertainty surrounding Donald Trump's trade policies. Moreover, Hauser believes Australia stands to benefit significantly from the US-China rivalry. Chinese companies are already reducing engagement with American partners, creating opportunities for Australian natural resource suppliers to fill the gap.

Meanwhile, Canada's economy may face significantly greater headwinds. As Bank of Canada Governor Tiff Macklem stated on Thursday, the country's GDP growth is set to slow sharply following a relatively strong performance in the first quarter of 2025. January-April figures will be released on May 30. They are projected to show 1.5–1.8% growth, according to market consensus. While Macklem hopes for tariff relief following negotiations with the US, he still anticipates slower GDP expansion in coming months.

One line of the Stochastic oscillator has already entered oversold territory, suggesting limited downside potential for AUDCAD. A price reversal upward would bring the 0.9 level back into reach.

Consider the following trading strategy: 

Buy AUDCAD near the level of 0.89. Take profit – 0.9. Stop loss – 0.882.