The AUDCAD would be the most awaited currency pair for this week as both central banks are expected to release monetary policy reports.
Hawkish RBA Initiated AUD Bulls
The Reserve Bank of Australia (RBA) deviated from its peers by implementing a unique course of action in November: an increase of 25 basis points in interest rates to 4.35%, after five months during which they were maintained at 4.10%.
The guidance shifted from "further monetary tightening may be required" to "whether monetary tightening may be required," implying that this could be the last increase. As a result, the Australian dollar initially declined significantly.
Despite worldwide indicators indicating a deceleration in inflation, the RBA opted to narrow the disparity in interest rates with its counterparts, alluding to apprehensions regarding domestic price pressures.
Despite indications that China's economy has been stimulated by incremental measures, the effect has been minimal. The unexpected upward surprise of the headline CPI and the exceeding of 0.2% forecasts for Q2 GDP by 0.4% demonstrate the resiliency of the Australian economy. While no policy adjustments are expected this week, former RBA employees have alluded to the potential for an additional interest rate increase in the event that robust wage growth continues.
What To Expect From BoC?
Local monetary policy remains unchanged at 5%, as the central bank anticipates maintaining interest rates at that level. There has been an absence of economic expansion over the last three months, and the October employment report revealed an increase of 17.5k jobs, exclusively in the part-time category.
The contraction of -3.3k full-time jobs was the first decline in employment growth since May 2021, resulting in an increase in unemployment from 5.5% to 5.7%, the highest level since January 2021.
Furthermore, there is evidence that inflationary pressures are diminishing, as the median core CPI decreased from 3.9% to 3.6% in October.
AUDCAD Technical Analysis
In the daily chart, the AUD/CAD price showed a strong bullish rebound from the 0.8598 bottom, which indicates a strong continuation opportunity.
Considering the fundamental outlook, another hawkish tone from RBA, with a bullish rejection from the 20 EMA area, could increase the price above the 0.9229 resistance level.
Moreover, an immediate bullish pressure and a reversal below the 20 DMA could be a short opportunity, where the main aim is to test the 0.8700 level.
