AUDCAD: RBA Cautious Amid Market Expectations (21st March)

Key Developments

• Markets expect another rate cut soon, with a 65% probability of a reduction at the next RBA meeting.
• The RBA remains cautious, citing uncertainty over US trade policies and their impact on inflation.
• February’s 0.25% rate cut is still working its way through the economy, with its full impact expected by late 2025.
• Consumer confidence is falling, reaching its lowest level since October 2024, partly due to global economic uncertainty.
• Smaller lenders are undercutting big banks, offering variable home loan rates below 5.75%, while major banks hold at 5.84%.

Impact on Financial Markets

• Australian Dollar (AUD): A rate cut could weaken the AUD as lower rates reduce its appeal to investors.
• Housing Market: Lower borrowing costs could fuel a property price rebound, especially with a limited housing supply.
• Banking Sector: Competition among lenders is intensifying, which could squeeze margins despite strong loan demand.
• Equities & Bonds: Investors may shift from savings accounts into higher-yield assets, boosting stock and real estate markets.

Key Takeaway for Traders

The RBA is in wait-and-see mode, balancing inflation risks with economic growth concerns. Markets should watch for shifts in US trade policy and Australian consumer sentiment, as they could influence the timing and extent of future rate cuts.

AUDCAD – D1 Timeframe

The highlighted demand area on the Daily timeframe chart of AUDCAD is the drop-base-rally origin of the past two bullish structure breaks. As a result, we can expect prices to react from such a region. Considering additional confluences from the trendline support and the Fibonacci retracement level, a bullish sentiment is the rational conclusion.

AUDCAD – H4 Timeframe

The 4-hour timeframe chart of AUDCAD primarily supports the bullish argument of the higher timeframe. It shows the demand zone between 76% and 88% of the Fibonacci retracement tool. There is a tiny FVG region, as well as a liquidity region from the equal lows, confirming the bullish sentiment.

Analyst’s Expectations: 

Direction: Bullish

Target- 0,91123

Invalidation- 0.89500

CONCLUSION

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