AUDCAD prepares to test support amid RBA policy expectations

The AUDCAD pair has been declining in recent days, falling to 0.89234 after reaching a local high of 0.9045. Despite the long-term uptrend, the current decline suggests a correction driven by investor expectations surrounding potential Reserve Bank of Australia (RBA) monetary policy shifts.

The Australian dollar is weakening ahead of next week's RBA decision. While a 25 basis point interest rate cut to 3.85% is widely anticipated, recent strong labor market data has reduced the likelihood of deeper easing. Employment rose by a robust 89,000 in April to a record 14.64 million, boosting investor confidence in the Australian economy. Additionally, the recent US-China trade agreement offers some support for the AUD by alleviating concerns about a global economic slowdown.

Meanwhile, the Canadian dollar is under pressure due to weak employment data and lower oil prices. The latest indicators of the Canadian labor market signal a slowdown, increasing the probability of an interest rate reduction by the Bank of Canada as early as June. Furthermore, the International Energy Agency (IEA) forecast for a reduction in global oil demand by 650,000 barrels per day by the end of 2025 weighs on the Canadian dollar's outlook. As a major energy exporter, Canada faces additional pressure from increased OPEC+ production, further dampening the CAD.

Technically, the AUDCAD pair is undergoing a correction following its recent rally. On the daily chart, prices are testing the EMA(20) and EMA(50), signaling a short-term pullback in the uptrend. The Relative Strength Index (RSI) has dipped toward 60, reflecting reduced buying momentum. Key support remains at 0.89000.

The primary catalyst for the pair next week will be the RBA meeting and its interest rate decision. A dovish stance from the RBA would likely pressure the AUD, while maintaining current conditions would offer support.

Current recommendation:

Buy at the current price. Take-profit could be set at 0.90300. Set a stop loss at 0.89000.