Rate-Cut Roo Meets Cautious Loonie: AUDCAD Caught Between 0.90 Roof and 0.88 Floor

Summary

• Price stays capped beneath the 0.9000/0.9010 pivot while an April-to-May descending channel keeps lower highs intact. Immediate resistance sits at 0.9000-0.9030; a daily close above would open at 0.9300. On the downside, the former horizontal shelf near 0.8800 remains the first support, with 0.8700 as the next bear target.
• Momentum is neutral-to-soft: RSI hovers around 50, and MACD only turns positive, flagging a market that needs fresh catalysts to break out.

Fundamental Factors Affecting the Pair

• The RBA easing cycle accelerates. On 20 May, the Reserve Bank of Australia cut rates 25 bp (the second cut this year) and openly debated a 50 bp move, pushing swap markets to price further easing for July and pressuring the Aussie.
• Sticky Canadian core inflation tempers BoC cuts. Canada's headline CPI fell to 1.7 % in April, but median/trim indices jumped above 3 %, making it harder for the Bank of Canada to resume cutting after its April pause.
• Oil loses its bid. A Reuters poll now sees Brent averaging just $67 in 2025 after OPEC+ supply increases—denting CAD's traditional terms-of-trade tail-wind.
• Policy divergence narrows yield spread. With the RBA easing quickly and the BoC cautious, front-end rate differentials have stabilized near –40 bp, limiting further AUCAD downside.

Key Takeaway for Traders

Near-term, AUDCAD trades a tug-of-war between RBA-driven Aussie softness and CAD headwinds from softer oil and sticky core inflation. A decisive break of 0.8800 would expose 0.8700, but if oil stays heavy and the BoC balks at June cuts, a squeeze toward 0.9000-0.9030 is plausible. Fade extremes inside this 0.88–0.90 box until a clear catalyst—BoC (4 Jun) or China PMI—fires the next trend.

AUDCAD – D1 Timeframe

On the daily timeframe chart of AUDCAD, we see a bullish double break of structure. The highlighted area of demand is the origin of the initial impulse, and it enjoys confluence with the trendline support.

Analyst's Expectations: 

Direction: Bullish

Target- 0.90141

Invalidation- 0.87942

CONCLUSION

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