Executive Summary
AUD/CAD trades at 0.9510 as of March 11, 2026, up approximately 6.4% year-on-year and roughly 2.8% off the July 2025 trough near 0.8880. The pair currently sits approximately 4.6% above OECD PPP fair value of 0.91, with spot well above all major moving averages — the pair has re-rated sharply since the RBA's surprise February hike to 3.85%, which generated a 160-basis-point policy rate advantage over the BoC's 2.25%. The dominant bilateral narrative is one of reinforcing policy divergence: Australia is the sole G10 central bank actively hiking while Canada completed a 275bp easing cycle and now sits at the lower bound of its own neutral range. This rate gap is the widest since the RBA was last the G10 hawkish outlier in 2022–2023 and is the primary structural driver of the pair's re-rating. Tactically, however, the setup is complicated by extreme long-AUD positioning at the 100th percentile COT Index, which creates asymmetric unwind risk; the March 17–18 RBA-FOMC double event; and a pair that is approaching significant technical resistance near 0.9645–0.9700. We are moderately bullish AUD/CAD with tactical conviction 2/5 and strategic conviction 3/5, viewing the current 0.9510 level as expensive tactically given positioning crowding but justified directionally by the policy and growth differential — the preferred entry is a pullback toward 0.9350–0.9420 to capture the strategic carry and rate divergence trade at a more favourable risk/reward.