AUDCAD has limited growth potential

The AUDCAD currency pair, as it was indicated in the previous forecast, updated the lows from last fall. Quotes reached the level of 0.874, where the downward movement stopped. In September and October last year this level acted as a strong resistance, and now it has already declared itself as a support. Against this background, the bulls managed to win back some of the losses, but they did not move far. Until AUDCAD consolidates above 0.883, sellers have the initiative in AUDCAD trading.

The labor market statistics for January, released yesterday, speaks in favor of the continued weakness of the Australian dollar. The unemployment rate in the country rose to a 2-year high of 4.1%, which was worse than expected. Moreover, only 500 new jobs were created in the Australian economy during the month. This indicator also failed to meet the forecasts of analysts, who estimated it at more than 26 thousand.

Diana Mousina, Deputy Chief Economist at AMP Ltd., considers the data as an important signal for the Reserve Bank of Australia (RBA). If the inflation statistics for January, which is expected next week, also reflects a slowdown in economic growth, the bank may soften its position. As a result, the RBA meeting on March 19 may be held under the sign of more dovish officials' rhetoric.

James McIntyre, Bloomberg economist, now expects the first key rate cut in Australia as early as the second quarter of this year. Previous estimates suggested such a step no earlier than August. According to McIntyre's calculations, the Australian economy should create 32 thousand jobs every month to prevent unemployment growth. Otherwise, the unemployment rate of 4.4%, expected by the RBA by mid-2025, will be reached much faster. This will exert serious pressure on the Australian dollar exchange rate.

At yesterday's trading session, problems with continuation of AUDCAD quotes growth were already noticeable. A new wave of price decline may start in the nearest future. The nearest target is another test of the level 0.874.

The following trading strategy may be offered:

Sell AUDCAD in a range of 0.877–0.88. Take profit – 0.874. Stop-loss – 0.883.