AUD/CAD Signals
About the AUD/CAD (Australian dollar/Canadian Dollar)
The AUD/CAD pair is the abbreviated term used for the Australian dollar and the Canadian dollar, nicknamed as “Aussie Loonie”. Before we get into the particulars, what exactly does AUD/CAD rate mean? The exchange rate tells you how many Canadian dollars (quote currency) are required to purchase one Australian dollar (base currency). For example, if the pair is trading at 0.95, it means it takes 0.95 Canadian Dollars to buy 1 Australian Dollar.
Breaking Down ‘AUD/CAD’
The Australian dollar is known as a commodity currency due to the role of Australia in global gold production and export. Aussie exhibits a long-term positive correlation with the value of gold.
Whereas, the Canadian dollar is also classified as a commodity currency, as it exhibits a correlation to the energy products crude oil and natural gas. Since the Australian dollar is a first currency (base currency) and the Canadian dollar is a second currency (quote currency), the pair is called a cross currency pair.
What Determines the AUD/CAD Exchange Rate?
Several factors can impact the AUD/CAD rate valuation, including:RBA & BOC Monetary Policies: The Reserve Bank of Australia and the Bank of Canada control the supply of money in the market, to keep the economy on track. A dovish policy, which is also known as expansionary policy, from either of the central banks, weakens the related currency. In contrast, a hawkish monetary policy (contractionary policy) strengthens the currency.
Economic Events: The movement in the Canadian and Australian economic events determine the exchange rates. Top of the line economic events include GDP, Employment Change, Industrial Production, and Consumer Price Index. Better than forecast data increases the demand for related currency and impacts the value of either the Australian Dollar or the Canadian Dollar, causing fluctuations in the AUD/CAD exchange rate.
Currency Correlations
Correlation is merely a mutual relationship or connection between two or more things.
Positive correlation – The positive relationship merely is when pairs move in tandem with each other.
In the forex world, the AUD/USD, AUD/CHF and AUD/JPY currency pairs are positively correlated. It's because all these pairs have an Australian dollar in the numerator. So, any change in the Aussie will be reflected in these pairs.
Negative correlation – In contrast, a negative relationship is when forex pairs move in the opposite direction. For example, CAD/CHF and CAD/JPY pairs share a negative correlation. It's because the Canadian dollar is the base currency and is in the numerator.
Gold & Aussie: One essential characteristic of the AUD is that it has a high positive correlation with gold prices. The reason behind this is that Australia is the third biggest gold producer in the world. As a result, whenever the price of gold rises or falls, the Aussie goes along for the ride. This will ultimately move the AUD/CAD pair in the same direction.
Crude Oil & Loonie: Typically, the price of crude oil has been highly correlated with the Loonie. Therefore, a rise in crude oil prices increases the value of the Canadian dollar and vice versa. The AUD/CAD shares a negative correlation with crude oil prices.
Major Economic Events:
Gross Domestic Product – the Gross domestic product is the central measure of economic growth in the region.
Employment Change – Both currencies are sensitive to changes in employment, as slacks in the labor market cause a drop in Inflation rates.
Consumer Price Index – Since one of the goals of the RBA and BOC is to maintain price stability, they keep an eye on inflation indicators such as the CPI. If the annual CPI deviates from the central bank’s target, the RBA or BOC could make use of their monetary policy tools to keep inflation in check.
The balance of Trade – Australia and Canada have extremely robust trade sectors, so currency traders and bank officials alike tend to watch changes in each country’s export and import levels.
Political announcements & natural disasters – Besides the scheduled economic events, political elections, new systems, wars, terror incidents, and natural calamities, etc. can all cause severe variations within the AUD/CAD.
AUD/CAD Specifications
The AUD/CAD is traded in amounts denominated in the US Dollar.
Standard lot Size: 100,000
Mini lot size: 10,000
One pip in decimals 0.0001
Pip Value: $7.49
Formula
Pip Value = Tick Size x Trade Size x Base Quote/Current Rate
AUD/CAD - FAQs
AUD/CAD is a popular currency pair among forex traders, as it offers some interesting opportunities for trading in the long term. This is primarily because of the strong correlation between the Canadian and Australian economies, which makes AUD/CAD volatile yet predictable. There are advantages to trading this currency pair: it typically trends with good liquidity and tight spreads, making it ideal for short-term scalping strategies. In addition, its low transaction costs usually mean that there will be a minimal impact on your profits from trading fees. However, AUD/CAD can also be quite sensitive to global events and economic news affecting both countries – so keep an eye out for updates on our live rates updates coming from both Canada and Australia when deciding whether or not to enter a trade with this pairing.
The current trend of AUD/CAD is bullish, meaning that the Australian Dollar is appreciating in value relative to the Canadian Dollar. This means that if you were to convert AUD into CAD right now, you would get more CAD than what you had initially in AUD. The currency pair has been on an upward trajectory since mid-2020 and this bullish trend is expected to continue over the short term.
Currently, the Australian dollar (AUD) is strengthening against the Canadian dollar (CAD). Over the past year, AUD has appreciated by close to 10% against CAD. This means that for every 1 CAD, you are able to buy more AUD than in the past year. The current exchange rate of AUD/CAD is 0.9418, meaning that for every Australian dollar, it’s worth 94 cents Canadian dollars. As a result of market trends and economic conditions, it appears as though AUD will continue to appreciate further against CAD in the short term.
1. Australian and Canadian Economic Indicators: The AUD/CAD exchange rate is heavily influenced by the performance of the economies of both Australia and Canada, including their respective inflation rates, Gross Domestic Product (GDP) growth rates, interest rates, unemployment rates and trade balances.
2. Interest Rate Differentials: Also having an influence on the AUD/CAD exchange rate are interest rate differentials between two countries' central banks (Reserve Bank of Australia or RBA and Bank of Canada). An increase in interest rates might attract more investors to a particular currency which can cause its value to appreciate relative to another currency with a lower interest rate.
3. Commodity Prices: As both Australia and Canada export huge amounts of commodities such as coal, precious metals etc., variations in commodity prices have big implications for the economic well-being of these nations thus resulting in movement in their respective currencies against each other.
4. Political Factors: Geopolitical events such as elections can also affect the AUD/CAD exchange rate because it affects investor sentiment towards either one or both countries’ currencies due lack of confidence or optimism about an economy’s future prospects under certain governments' policies, regulations etc.
5. International Capital Flows: Large funds transferring from one country to another will also affect a currency pair's exchange rate as there is usually a large impact when large investment funds move from one nation to another which has direct implications on foreign exchange markets affecting currency pairs like AUD/CAD
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