Facts:

• The BoC kept interest rates unchanged and the CAD weakened after the decision.
• The market is pricing in a 50% chance of a rate hike by the RBA on November 7.
• Inflation in Australia surprised to the upside, increasing the chances of further hikes.
• AUDCAD has adjusted to recent gains in the oil market but has found clear support below 0.8700.

Trade: Long at the market price

TP1: 0.90

TP2: 0.92

SL: 0.8550

Justification:

Inflation in Australia surprised with a higher reading than expected. The annual CPI for Q3 came in at 5.4% YoY (down from 6.0% YoY, but above expectations of 5.3% YoY). Annual inflation for September accelerated from 5.2% y/y to 5.6% y/y. Traders point out that the current interest rate of 4.1%, which has remained unchanged since June, is not high enough to bring inflation down to target. Currently, there is a 50% probability of a rate hike in November and the market is pricing a terminal rate at 4.5% in the middle of next year. On the other hand, The Bank of Canada kept interest rates unchanged and no hikes are expected in the near future. Additionally, the AUDCAD pair has adjusted to the current oil price and there is a strong technical demand zone below 0.8700.