The AUD-CAD Pair: Hawks Collide, Breakout Imminent

The Australian Dollar strengthens this week under sustained hawkish policy, with RBA Assistant Governor Christopher Kent asserting that tighter monetary measures are effective. Markets currently price a 70% probability of a final rate hike to 4.60% by early 2024 despite easing inflation. Sustained strength in commodity exports—particularly gold, iron ore, and LNG—coupled with central bank resolve has supported AUD near multi-week peaks. All attention now focuses on Thursday’s July employment report for further directional clarity.

Canadian Dollar momentum gains traction amid robust economic data. Q2 GDP expansion reached 3.4% annually, surpassing the Bank of Canada’s 2.5% forecast. July employment surged 75,100 jobs—far exceeding estimates of 15,000—driving unemployment to a 24-month low of 6.4%. These figures amplify speculation of potential rate hikes should energy prices remain elevated, granting CAD autonomous upward pressure.

With both currencies anchored by genuinely hawkish narratives, AUD/CAD’s trajectory hinges on which central bank sustains tightening. The current symmetrical triangle pattern at 0.9847—coinciding with the 100-period EMA—signals a pivotal inflection point.

Technical Analysis of AUD/CAD

AUD/CAD has formed a symmetrical triangle since August 2023, with a descending trendline from the 0.9926 high converging with an ascending trendline originating at the 0.9748 low. Both lines converge near the current price of 0.9847, intersecting at the 100-period exponential moving average (EMA).

Bullish Scenario

A breakout above the descending trendline and the 0.382 retracement level at 0.9858 would trigger renewed momentum, targeting the 0.9926 resistance level—a psychological breakout zone.

Bearish Scenario

Conversely, a breakdown below the ascending trendline and the 0.5 retracement at 0.9837 could accelerate declines toward the 0.618 level at 0.9816, with further downside risk threatening a retest of the 0.9786 (0.786 retracement) or the foundational 0.9748 support level.

Positioned at the triangle’s apex, AUD/CAD awaits a decisive move. Will the RBA’s hawkish stance prevail, or will Canada’s stronger-than-expected data drive the pair lower?

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