On Friday, AUDCAD is expected to rise moderately on the back of hawkish rhetoric from the Reserve Bank of Australia (RBA). RBA Governor Michelle Bullock reiterated the central bank’s willingness to raise interest rates if necessary to fight inflation. In addition, the minutes of the RBA’s August meeting indicated that the current rate may remain unchanged for an extended period of time. This is supportive for the Australian dollar.
On the other hand, the dynamics of the Canadian dollar will be influenced by the upcoming data on retail sales in Canada and the situation surrounding the rail freight shutdown in the country.
The country’s largest rail operators, National Railway and Canadian Pacific Kansas City, have suspended operations due to an impasse in negotiations with the labor union. This could have serious economic consequences, as the railroads move about 380 billion Canadian dollars worth of goods each year.
Moody’s estimates that the shutdown will cost the Canadian economy 341 million Candaian dollars per day. This could increase pressure on the national currency. Against this backdrop, and with the support of a strengthening Australian dollar, the AUDCAD pair may continue to rise as the Canadian dollar weakens due to economic risks.
The technical analysis of the AUDCAD currency pair shows the formation of a new upward trend on the H2 timeframe. The price has reversed near the support of the trend and is heading towards the resistance of the channel. The Moving Average of Oscillator Volume (with parameters 12, 26, 9) is preparing to enter the positive zone, which strengthens the signal for the pair’s growth.
The short-term outlook for the AUDCAD pair suggests buying with the target at 0.9260. Partial profit taking is recommended at the 0.9200 level. A stop loss could be set at 0.9060.
As the bullish trend is short term, the volume of trading should not exceed 2% of the total balance in order to reduce risks.
