At the beginning of the week, the AUDCAD currency pair updated its low since mid-August, but then the rates began to recover. The price growth was quite moderate until Thursday, when the Australian dollar sharply strengthened against its Canadian equivalent. The rates have moved back above the 0.91 level and may head towards last month’s peaks around 0.918 in the coming days. Both technical and fundamental factors support such a scenario.
The results of a Reuters poll among analysts about the outlook for Canada’s economic growth at the end of the 3rd quarter were presented. The Bank of Canada expected GDP growth of 2.8%, but market participants are much more pessimistic. Andrew DiCapua, senior economist at the Canadian Chamber of Commerce, sees GDP growth from July through September at only 1–1.5%. Randall Bartlett of Desjardins suggests 1%. He believes that exports of oil and vehicles from the country will be significantly lower than the Canadian authorities’ forecasts.
Therefore, the Canadian Imperial Bank of Commerce has sharply revised its forecast on further monetary policy. According to experts of the organization, the Bank of Canada will be forced to reduce the key rate by 0.5% at least at one of the two meetings left before the end of the year. By June 2025, the borrowing cost may reach 2.25%. This is significantly lower than the Reserve Bank of Australia’s (RBA) key rate forecasts.
The RBA, unlike the Canadian regulator, is still in no hurry to cut interest rates. This week, the chief economist of the Australian regulator, Sarah Hunter, once again drew attention to the country’s tight labor market. In her words, the dynamics of employment and wages in Australia exceeds both forecasts of the RBA and indicators of almost all other developed countries. Thus, it is too early to start the monetary policy easing cycle. Traders expect the first such step in December at best.
The Stochastic indicator on the daily chart of AUDCAD confirms the rates reversal upward. The bulls can choose 0.918 as the nearest growth target, and then move towards the July highs.
Consider the following trading strategy:
Buy AUDCAD at the current price. Take profit – 0.918. Stop loss – 0.906.
