The AUDCAD currency pair was declining in Friday morning trading, extending losses from the beginning of the week, which were driven by the weak data on Australia’s GDP. At the same time, both Canada and Australia are facing economic challenges. At the time of writing, the pair is trading near 0.88780.
Canada's economy has been severely challenged by US trade policy, which resulted in a record trade deficit in April. Exports to the US, traditionally a key driver of economic growth, plunged 15.7% to the lowest in two years. Domestic concerns prompted the Bank of Canada to hold the interest rate at 2.75%, opting for a wait-and-see stance due to persistent inflation and trade uncertainty. However, rates are expected to be reduced in the fall if the economic situation continues to deteriorate. The Canadian dollar strengthening after the central bank meeting points to relative market optimism despite persistent long-term risks.
Trade tensions are weighing on Australia’s economy, too. The country’s GDP expanded only 0.2% in the first quarter, below the forecast, and consumer spending showed historically-low annual growth. The Reserve Bank of Australia is actively cutting rates in an attempt to support the economy amid global trade tensions. Market participants expect further monetary easing and project rates to be reduced to 2.85% by the start of next year.
Current data suggests both currencies are under pressure, yet the Aussie is struggling more. Rate cuts by the Reserve Bank of Australia and weak macroeconomic data put additional pressure on AUD. At the same time, despite problems in the Canadian economy, CAD still has a chance to stabilize due to steady inflation and possible improvement in trade relations with the US.
The technical analysis confirms weak AUDCAD. On the daily chart, the price is below the moving averages EMA (50) and EMA (20), indicating a downtrend. The Relative Strength Index (RSI) stands at 43, pointing to neither overbought nor oversold conditions. However, MACD confirms the downward momentum, as the lines are moving downward and the main line is below the signal line.
Consider selling AUDCAD from current levels. Take profit could be set at 0.88180, and Stop loss could be placed at 0.89150.
This content is for informational purposes only and is not intended to be investing advice.
