On Friday, the AUDCAD pair is demonstrating moderate growth after a week-long downtrend. The Australian dollar is strengthening thanks to the hawkish outlook of the Reserve Bank of Australia (RBA). Retail sales growth in August surpassed expectations, reducing the possibility of an interest rate cut by the RBA. Markets have almost ruled out any chance of a rate cut in November.
Additional support for the Australian currency comes from economic incentives imposed by China, Australia’s largest trading partner, which has boosted commodity prices.
Moreover, the Judo Bank Flash Australia Services PMI for September amounted to 50.5, down from 52.5 in August. This marks the eighth consecutive month of expanding activity in the sector, although at a slower pace.
Meanwhile, expectations of further interest rate cuts by the Bank of Canada are weighing on the nation’s currency. At the same time, rising tensions in the Middle East are keeping crude oil prices near one-month highs. This constrains the fall of the Canadian dollar, which is closely tied to commodities.
Traders are now maintaining a wait-and-see approach ahead of the release of the US key employment data, which are weighing on the Canadian currency. According to forecasts, the US economy added 140 000 jobs in September, which is slightly less than the previous figure of 142 000. The unemployment rate is expected to remain at 4.2%.
Technical analysis on the H6 timeframe shows the formation of an uptrend. Wave analysis indicates the formation of the fourth downward wave. However, the Relative Strength Index (RSI) divergence (standard parameters) signals a possible reversal towards growth and the start of formation of the fifth wave.
Short-term prospects of the AUDCAD currency pair suggest buying, with the target at 0.9430. It is recommended to take part of the profit at 0.9365. The loss limiting level is at 0.9160.
Since the bullish trend is short-term, the trading volume should not exceed 2% of the total balance to reduce risks.
