- AUD/CAD has strengthened on the back of improved risk sentiment and lower oil prices.
- However, as oil prices have become more stable, AUD/CAD may struggle to strengthen further.
- Since June of this year, AUD/CAD has kept within a trading range of approximately 0.93 to 0.97. Most of the economic divergences this year have likely been priced in.
- A Purchasing Power Parity model also suggests all prices above 0.83 could be excessive.
- Higher inflation rates in Canada may increase the AUD/CAD fair value estimate for 2020, but AUD/CAD is still likely to remain overvalued over the next 12 months on the basis of relative purchasing power.
For further details see:
AUD/CAD Could Weaken As Oil Market Stability Strengthens Case For Canadian Comeback