AUD/CAD Test Downtrend Line Amid Forecast Increasing Inflation in Australia

AUD/CAD  Forecast & Technical Analysis

Australia – Consumer Price Index

On Wednesday, at GMT 12:30 a.m., the Australian Bureau of Statistics will release the quarter-over-quarter consumer price index (CPI) figure. It measures the changes in the price of goods and services bought by Australian consumers in the last quarter.

The Australian central bank primarily uses the consumer price to measure inflation. Any significant change in the CPI often makes the Forex market extremely volatile. Also, inflation at the retail level has a big influence on the central bank’s future monetary policy. Hence, it is considered by regulated binary options brokers to be a leading indicator of the Australian economy.

Last quarter, the Australian consumer price index decreased by -1.9%. The forecast for this quarter is that it will likely increase by 1.5%. 

Canada – Overnight Rate

On Wednesday, at GMT 2:00 p.m., the Bank of Canada will release the overnight rate. The overnight rate is the interest rate that banks and other financial institutes in Canada use to lend and borrow funds among themselves.

Binary options investors consider the overnight interest rate to be the paramount factor in the valuation of the Canadian Dollar against other major currencies. In fact, it is often stated that binary options traders analyze all other fundamental data just to predict the future interest rate decision. Hence, any major change in the overnight interest rate may create large price swings on Wednesday.

Last month, the Bank of Canada kept its overnight rate at 0.25%. Analysts are expecting the BOC to leave it unchanged at 0.25%.

AUD/CAD Forecast

AUD/CAD chart on 27th October 2020

Since early June, the AUD/CAD remained range-bound. During the last few months, it mostly traded between 0.9265 and 0.9640 levels. Last week, it fell to the support near 0.9265 level once again but failed to break it. Over the last few days, it started a bullish retracement. Currently, it is testing the intermediate downtrend line. If the AUD/CAD breaks above the downtrend line, it will likely find resistance near the 0.9430 level.

The Australian Consumer Price Index will likely jump by 1.5% over the last month. On the other hand, analysts are expecting the Bank of Canada to leave the overnight rate at 0.25%. We believe it would set a bullish fundamental outlook for the AUD/CAD this week. Therefore, if the AUD/CAD closes above the resistance near 0.9430, it would likely attract additional bullish momentum in the market.

Hence, Australian binary options investors should look out for trading opportunities above this major resistance level around 0.9430.

Asif worked as a prop trader for almost a decade, and later he managed trading operations for one of the largest foreign exchange strategy developers in Europe. Currently, he works as a trading consultant to several brokers and writes on various tech and financial topics. You can reach him at contact@asifimtiaz.com

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