Bias: The CAD/AUD currency pair is currently bearish-to-range-bound, sitting below the 90-day average and within the lower half of the 3-month range.
Key drivers:
• Rate gap: The Bank of Canada recently cut its interest rate, which may weigh on the CAD, while the Reserve Bank of Australia is signaling potential rate hikes to combat inflation, supporting the AUD.
• Risk/commodities: Oil prices have been robust recently, trading above their 3-month average, which could help bolster the CAD if this trend continues.
• Chinese economic recovery: Weak inflation data from China raises concerns about demand for Australian exports, particularly for commodities like iron ore, influencing the AUD negatively.
Range: The CAD/AUD is expected to drift within its recent range, possibly avoiding any extremes unless influenced by significant shifts in oil prices or economic reports.
What could change it:
• Upside risk: A rebound in oil prices could provide the CAD with much-needed strength.
• Downside risk: Ongoing concerns over global economic slowdown and weak Australian export demand could further pressure the AUD.
