The AUDCAD currency pair is declining moderately on Friday after a recent correction as traders focus on the key Canadian labor market data.
Investors expect today’s employment data for August to show an increase of 26 500 new jobs. Confirmation of the data will be a rebound from the previous decline of 2 800. However, the unemployment rate is expected to rise to 6.5%, up from 6.4% in the previous month. If the data turns out to be worse than expected, it may limit the strengthening of the Canadian dollar.
On Wednesday, the Bank of Canada lowered its key policy rate by 25 basis points to 4.25%, citing weak economic growth. As the bank’s governor Tiff Macklem said, a larger easing of monetary policy may be appropriate if the economy needs additional stimulus.
The decline in Canadian bond yields as well as the central bank’s soft stance on monetary policy put negative pressure on the Canadian dollar.
At the same time, Australia’s trade balance data and the speech of the Reserve Bank Governor Michelle Bullock support the Australian currency. According to Bullock, there are no plans to reduce interest rates in Australia in the near future.
Technical analysis of AUDCAD currency pair on the H4 timeframe indicates the formation of a new upward trend. From the point of view of wave analysis, the price is in the stage of formation of the second corrective wave. The volumes of Moving Average of Oscillator indicator (with parameters 12, 26, 9) remain in the positive zone. This strengthens a signal for the growth of the pair and possible transition of the second wave into the third ascending one.
Short-term prospects for the AUDCAD currency pair price suggest buying, with the target at the level of 0.9250. Part of the profit should be taken near the level of 0.9710. A stop-loss level could be set at 0.8985.
Since the bullish trend is short-term, the trading volume should not exceed 2% of your total balance to reduce risks.
