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The AUDCAD advanced by +0.30% after bouncing from the 0.8600 support, a 2-year low. The Canadian dollar was under selling pressure ahead of the August Manufacturing Sales release on Friday. The number is expected to drop to -1.8% from -0.1%. A negative number could trigger bullish momentum towards the 0.8750 level, a previous support-turned-resistance.
The selling pressure on oil markets continues to underpin the Canadian dollar’s weakness. The OPEC+ trimmed the oil demand outlook for 2023 as slowdown concerns weigh amid rising US Crude Oil stocks. The USWTI crude oil futures were down by -0.96% while Brent lost -0.86% on Friday.
However, there is still room for downside movement for the AUDCAD pair as the RBA pivots from their monetary policy tightening amid rising inflation. The US inflation print rose to 8.2% against the 8.1% forecasted indicating soaring global inflation remains a major headwind for the AUDCAD near-term bulls.
Investors should pay attention to the RBA meeting minutes due for release next week Tuesday for clues on the monetary policy guidance. Moreso, a cut in oil output scheduled for November could limit upside gains.
Monthly Chart Analysis
The pair has suffered losses for 2-consecutive months and the break below the 0.8750 level strengthened the bearish outlook in the medium-term. The 50 and 200-moving average suggests that the pair’s outlook is bearish in the long term and the price could retest the 0.8050 level in the near term as gains are capped by the 0.9100 and 0.9500 levels.
However, The MACD indicator suggests that the pair has limited momentum to the downside as volume bars trade close to the 0.00 neutral level. Prices could retrace to the upside and reclaim of the 0.8750 level could trigger bullish near-term targets at the 0.91000 level. A break above the 0.9500 level, coinciding with a 200-day moving average, could invalidate the pair’s bearish outlook and near targets are at the 1.000 level, the parity level.
ActivTrader sentiment tool suggests that 74% of retail traders are bullish on the AUDCAD pair. This outlook could have been triggered by falling oil prices. The near-term bulls could enjoy the rally in the pair although gains could be short-lived. The pair has not bottomed yet and the possibility to trade lower remains higher as a cut in OPEC+ daily production could trigger a rally in oil prices in the near term.
On the other hand, a pivot in the RBA interest rates outlook remains the major headwind for near-term bulls. A slump in Chinese production data will continue to weigh on the pair as Australia remains a major beneficiary in the long term.
Daily Chart Analysis
The AUDCAD maintained modest gains after bulls bounced off the 0.8600 support level and near-term gains are capped by the 0.8750 level, a previous support-turned-resistance. A break above the 0.8800 level, coinciding with a Bollinger Band baseline could reinforce a bullish outlook towards the 0.9050 level, a 2-months high.
However, looking at the RSI, the indicator suggests that the pair remains bearish as reading trading below the 50.00 level neutral level. A failure to trade above the 0.8750 level could see bears trade back towards the 0.8600 level and a break below that could invalidate the current bullish outlook. The bears could target the 0.8500 psychological level if 0.8600 near-term support fails to hold.
