Reserve Bank of Australia warns on inflation credibility: Can AUD/CAD extend its decline?

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Australian Dollar drops 0.65% to C$0.9721

Highlights

Reserve Bank of Australia Deputy Governor Hauser warns public confidence in the central bank's inflation control is weakening after inflation remained above 2% to 3% for over five years.
Concerns about the effectiveness of Australian monetary policy and sustained inflation could undermine the Australian Dollar within the AUD/CAD pair.
AUD/CAD trades below key moving averages across all timeframes with technical indicators showing strong downside pressure and a projected range of C$0.9672 to C$0.977 for the next 2 to 3 days.

Erosion of policy credibility feeds Australian dollar weakness

Reserve Bank of Australia Deputy Governor Andrew Hauser warned that public confidence in the central bank’s capacity to manage inflation is slipping, noting that inflation has stayed above the 2%-3% target band for more than five years, according to Investing.com. The erosion in confidence could prompt concern over the effectiveness of Australian monetary policy and pressure the Australian Dollar, which is a key component in the AUD/CAD pair. These concerns feed directly into market sentiment, contributing to weaker demand for the Australian Dollar against its Canadian counterpart.

Bearish momentum persists amid oversold signals and resistance

On the H1 chart, AUD/CAD is trading below the MA-20 and MA-50, while on the daily timeframe it remains under the MA-200, indicating sustained bearish momentum across multiple periods. The Ichimoku Kijun at C$0.9759 acts as immediate resistance. Recent readings show MACD and ADX both signaling a sell bias, while RSI, Stoch RSI, and CCI are each in their oversold zones—pointing to conditions that could trigger a short-term rebound or mark the exhaustion of current sellers. Intraday data shows Bull/Bear Power favoring sellers, and the Awesome Oscillator confirms the prevailing downside pressure. The presence of all three oscillators in oversold territory contrasts with strong momentum from dominant sellers, underlining a technical divergence between possible rebound conditions and the ongoing bearish trend.

Consolidation likely as downside risk dominates near-term outlook

Over the next 2–3 trading days, the expected range for AUD/CAD is C$0.9672 to C$0.977. The probability of further declines is high, with any upside scenario considered unlikely in the near term. The baseline case is for the pair to consolidate within this corridor. Should price break above the immediate resistance at the Ichimoku Kijun, a corrective rally could emerge, while a failure to hold support would confirm a continuation of the downward trend.

Anton Kharitonov, expert at Traders Union, sees the AUD/CAD pair under sustained pressure, with both technicals and sentiment working against an immediate recovery. He notes that bearish momentum is confirmed by price action below all key moving averages and multiple oversold indicators, while eroding public confidence in the RBA further weighs on the AUD. The analyst believes that a rebound is unlikely unless immediate resistance is reclaimed. "Base case remains consolidation or further decline — unless C$0.9759 is broken, I stay defensive on the Australian Dollar."

Earlier, analysts noted that persistent bearish momentum remained the dominant theme for AUD/CAD despite brief rebounds. This outlook is reinforced by new signals of technical divergence and heightened downside pressure, making the ability of the pair to hold above C$0.9672 the key risk level to track in the coming sessions.

Source of Data: AUD Price Analysis by TU

The analysis is based on a proprietary model combining technical, on-chain, and expert data. Not investment advice. See methodology

The information is based on forecasts and does not constitute investment advice or a guarantee of future results. Market conditions may change. See our Disclaimer and Editorial Integrity for details.