The main catalyst for the Australian dollar continues to be the July inflation data published on 26 August. Inflation came in at 3.5% year-on-year, above expectations of 3.2%, while the Trimmed Mean rose 0.5% month-on-month against a forecast of 0.3%. The next day, 27 August, NAB updated its forecast for the RBA's next policy decision: the bank now expects a 25-basis-point rate hike at the September meeting, which would lift the rate to 4.6%, with a further increase possible in November. Surprises above consensus in inflation have historically drawn market attention to central bank tightening expectations, and in currency markets shifts in expected policy rates are a primary driver of exchange-rate moves, since higher rates tend to make a currency more attractive to yield-seeking capital.

For the Canadian dollar, the decisive factor was the Bank of Canada's decision. On 2 September, the central bank held its policy rate unchanged at 2.25% for the seventh consecutive meeting, citing economic uncertainty arising from US tariffs and Canada's retaliatory trade measures. This leaves AUD/CAD positioned between two diverging policy backdrops: a hawkish repricing in Australia against an extended pause in Canada. The trade-policy friction cited by the Bank of Canada adds a further layer of uncertainty for the Canadian dollar, as tariff developments affect export expectations for a heavily trade-dependent economy.

Technical Analysis of AUD/CAD

The four-hour AUD/CAD chart shows a pronounced uptrend that has carried the pair up to current resistance at 0.9985. Near the top of this advance, a pattern resembling a converging triangle took shape, with price fluctuations gradually narrowing within the formation. However, volume behaviour during the second half of the pattern's development has been atypical, raising questions about its reliability. Converging triangles are generally treated by technicians as continuation patterns, but confirmation normally requires a breakout supported by volume; when volume contracts or behaves irregularly during the final phase of the formation, the signal value of the breakout weakens.

Even so, the price has broken out of the pattern and moved above the upper boundary of the current market profile at 0.9950, and it is now attempting to consolidate above that level. Should the advance continue, the resistance level around 0.9985 represents the next key obstacle to the upside — a level that also sits near parity with the Canadian dollar, a round-number threshold that often attracts chart-focused attention.

If the breakout proves false, the price could fall back into the profile. In a bearish scenario, the pair would need to break not only the profile's upper boundary but also the Point of Control (POC) at 0.9935 and the lower boundary at 0.9910. Below the market density, a support level sits at approximately 0.9895.

The RSI + MAs indicator currently shows readings of 59, 52, and 54. The RSI has climbed above the neutral zone, while both the fast and slow moving averages remain below its upper boundary.

Key Takeaways

Atypical volume dynamics during the triangle's formation leave the reliability of the breakout in question, and the price's attempt to establish itself above the market profile has not yet been confirmed by the RSI + MAs indicator. The pair's direction from here may depend largely on whether the anticipated tightening of RBA policy materialises, set against the Bank of Canada's wait-and-see stance — making the RBA's September meeting and any further Canadian trade-policy headlines the events to watch next.