AUD/CAD Eyes Further Upside Amid Oil Price Pullback and Improved Risk Appetite

Market Overview

The Australian dollar has regained ground against the Canadian dollar in Wednesday’s session, buoyed by a combination of softening oil prices and improved market sentiment. Oil, a key driver for the Canadian dollar, retraced from its recent peak of $67 per barrel, putting downward pressure on the loonie. Meanwhile, a shift in tone from US President Donald Trump regarding tariffs on China has fostered greater risk appetite in global markets. As a result, commodity-linked currencies such as the Australian dollar have attracted renewed interest, helping AUD/CAD extend its recent gains.

Technical Analysis

On the hourly chart, AUD/CAD continues to trade within a short-term uptrend, displaying a series of higher lows and higher highs. The pair currently challenges the immediate resistance at 0.88717, a level that coincides with the prior swing high. A sustained break above this barrier would reinforce the bullish momentum, opening the path toward subsequent resistances at 0.88797, 0.88898, and 0.89010.

Momentum indicators further support the bullish bias. The RSI remains in positive territory, signaling firm buying interest, while the MACD histogram continues to expand above the zero line, confirming increasing upside momentum. Additionally, price action remains above the short-term moving averages, suggesting a continuation of the upward trajectory.

However, should buyers fail to breach 0.88717, the nearest support lies at 0.88605, with further downside targets at 0.88424. A decisive break below this latter level would invalidate the current bullish setup and signal a potential reversal.

Key Technical Levels

Resistances: 0.88797, 0.88898, 0.89010
Supports: 0.88605, 0.88424

Fundamental Drivers

While oil prices remain a central focus for CAD traders, the upcoming US Purchasing Managers’ Index (PMI) readings will also influence broader market sentiment. Additionally, the Energy Information Administration (EIA) is set to release its weekly petroleum status report, covering changes in inventories of crude oil, gasoline, distillates, and other refined products. Given oil’s direct correlation with the Canadian dollar, unexpected shifts in inventory levels could trigger heightened volatility in CAD pairs, including AUD/CAD.

Conclusion

AUD/CAD remains poised for further gains if buyers break 0.88717, targeting 0.88898 and higher. A drop below 0.88424 would signal bearish reversal potential.

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