AUDCAD is likely to keep pulling back from its monthly high

At the start of this week, the AUDCAD currency pair hit a high not seen since mid-May, testing the 0.898 level. Since then, the pair has entered a correction phase, with the primary target likely being a retest of 0.883. The technical setup supports this pullback, and macroeconomic indicators for AUDCAD also favor selling the Australian dollar against the Canadian dollar. The downward move has a strong chance of accelerating next week.

The Reserve Bank of Australia (RBA) will hold its next policy meeting on Tuesday, July 8. Over 80% of economists surveyed by Reuters expect a third interest rate cut this year. Additionally, 60% of respondents anticipate further monetary policy easing by the RBA in Q3, as Australia’s inflation and economic growth rates are slowing faster than expected, prompting more decisive action from the central bank.

Next week also marks the deadline for trade agreements set by US President Donald Trump. Australian Prime Minister Anthony Albanese stated today that tariffs on goods exported to the US are highly likely to remain at 10%. While Albanese pledged to push for more favorable trade terms, he cautioned against expecting such an outcome.

Meanwhile, Canadian companies have already begun pivoting to reduce reliance on the US market. Data released yesterday showed Canada’s trade deficit narrowed by over 20% in May, to CAD 5.9 billion. Trade volumes between Canada and the US fell to their lowest level since 2020. Excluding the US, Canadian exports rose 5.7% to a new record high, according to Statscan. This diversification is likely to reduce the Canadian dollar’s vulnerability.

On the AUDCAD daily chart, the Stochastic indicator’s lines have crossed downward, signaling a sell opportunity. The 0.883 level could act as a target for bears.

Consider the following trading strategy:

Sell AUDCAD at the current price. Take profit – 0,883. Stop loss – 0,898.