The AUD/CAD has crossed the 0.9500 mark, currently trading around 0.9520 during Friday’s European session. This increase comes after a recent rebound, but further gains might be limited due to the strong Canadian Dollar, which is supported by rising oil prices. West Texas Intermediate (WTI) oil is priced at about $64.00 per barrel, having dropped after six weeks of increases. There are high hopes for a US-Iran meeting that could affect global oil production, which is causing concerns about military and supply issues. The Australian Dollar is under pressure from a sell-off in tech stocks but has made a small recovery. Comments from the Reserve Bank of Australia Governor about the need for tighter policies due to the economy’s limited capacity have helped. Key factors influencing the Canadian Dollar include the Bank of Canada’s interest rates, oil prices, and trade balance. Typically, higher interest rates and oil prices strengthen the CAD. Economic data like GDP and employment also play a crucial role in its value. The Bank of Canada employs various strategies to keep inflation within the target range of 1-3%. Changes in economic sentiment and developments in the US economy also impact the CAD. Forex Analyst Akhtar Faruqui regularly shares insights and news about Forex trends. Looking back to early 2025, the AUD/CAD was testing the 0.9500 level. At that time, the Reserve Bank of Australia was unexpectedly firm, and strong oil prices were boosting the CAD. The market was uncertain, awaiting new data to determine the next move. There were doubts about whether the RBA’s strong stance would hold and if oil prices could stay high. Since then, the outlook for the Canadian Dollar has improved significantly, leading to a downward trend in the pair. Oil prices, after a short decline following US-Iran talks in 2025, have recovered due to renewed OPEC+ discipline, now trading close to $78 a barrel as of late January 2026. This, along with persistent Canadian inflation above 3.1%, keeps the Bank of Canada in a position of not planning to cut rates in the first half of the year. On the other side, the Australian economy has shown signs of slowing down over the past year. The Q4 2025 GDP growth was only 0.2%, below expectations. Recent comments from the RBA have shifted away from the strong tone we heard from Governor Bullock in early 2025. Markets expect the RBA to be one of the first major central banks to lower rates, possibly as soon as May. With this growing gap in monetary policy, traders might want to prepare for further declines in AUD/CAD. Buying put options with strike prices below the current level of 0.9150 could be an effective way to profit from a continued drop into spring. This strategy provides defined risk, limited to the cost of the options. We should also brace for short-term volatility ahead of upcoming inflation reports from both countries. A bear put spread—purchasing a higher-striking put and selling a lower-striking one—could be a useful strategy to lower initial costs while protecting against sudden, brief rallies. This method would benefit from a gradual decline in the currency pair. Historically, times when interest rate differences widen between the Bank of Canada and the Reserve Bank of Australia have led to lasting trends in the AUD/CAD. For example, the sustained downtrend from 2017 to 2018 occurred when the BoC tightened policy while the RBA remained steady. The current situation mirrors this setup, providing opportunities for derivative traders.

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