Bias: The outlook for AUD/CAD is bullish-to-range-bound, as it currently sits above the 90-day average and in the upper half of the recent 3-month range.
Key drivers:
• Rate gap: The Reserve Bank of Australia is signaling potential interest rate hikes, which could support the Australian dollar, while the Bank of Canada recently reduced its rate, placing downward pressure on the CAD.
• Risk/commodities: Oil prices are currently above average, which typically strengthens the CAD, though volatility in oil futures continues to create uncertainty.
• One macro factor: China's inflation slowdown raises concerns about demand for Australian exports, potentially impacting the AUD's performance.
Range: AUD/CAD is likely to hold within the recent range, but could test its extremes if economic data varies significantly.
What could change it:
• Upside risk: Strong Australian employment data could boost the AUD further.
• Downside risk: A significant drop in oil prices could weaken the CAD and impact AUD/CAD movement negatively.
