The AUD/CAD outlook is bullish-to-range-bound, as the rate is currently above the 90-day average and within the upper half of its 3-month range.
Key drivers:
- Rate gap: The Reserve Bank of Australia has signaled potential interest rate hikes, in contrast to the Bank of Canada, which recently reduced rates to support economic growth.
- Risk/commodities: Oil prices are currently above average, which supports the CAD but also indicates volatility that can impact the AUD, given its commodity ties.
- One macro factor: Recent disappointing Chinese inflation data raises concerns over demand for Australian exports, particularly commodities such as iron ore.
Range: The AUD/CAD is likely to hold in its current area but may test the higher extremes if global risk appetite improves.
What could change it:
- Upside risk: A significant rebound in Chinese demand for Australian exports could strengthen the AUD.
- Downside risk: Continued increases in Canadian unemployment could dampen CAD strength and subsequently impact the AUD/CAD pairing.