On Friday, Canada’s National Statistics Agency reported that 65,500 jobs were lost in August, thus pushing the unemployment rate up to 7.1%. This figure outstripped even the most pessimistic analytical forecasts. With the national economy slashing jobs for the second month running and unemployment hitting its highest in four years, it looks like the Bank of Canada might be cutting interest rates this month. The report states the ongoing tariff dispute with the US and poor sector performance contributed to the economic downturn. The industries hit hardest included professional services, transportation, and manufacturing. Ontario, home to the country’s auto and steel production, saw the most job cuts, with Toronto’s unemployment rate reaching nearly 9%. Weak labor market data, coming shortly after the second-quarter economic contraction report, has raised concerns that Canada may be entering a recession. As a result, financial markets predict an 80% chance of a rate cut in September.
The yield on 2-year Canadian government bonds fell around 8 basis points to 2.537%. Over the past three meetings, the central bank has held its interest rate steady. However, mounting evidence of economic softening suggests officials may consider further monetary easing. This includes persistent core inflation at 3% and a growing labor market slack. The regulator will come into play with additional easing if price pressures remain subdued and economic conditions deteriorate.
In Australia, however, the central bank has opted to keep current monetary settings unchanged, which is likely to bolster its national currency in the mid-term. The contrasting approaches between the two countries suggest the AUDCAD pair will appreciate further. Nevertheless, as the pair has seen significant gains lately, it would be wise to wait for a pullback toward the support zone before opening a position.
The overall recommendation is to buy AUDCAD from the 0.9030 level. Profits are taken at 0.91250. Stop loss is set at 0.8950.
The volume of your open position should be calculated so that the potential loss (protected by a Stop Loss order) does not exceed 1% of your deposit. If your account balance does not allow opening a position of this size, it is better to avoid entering the market on this signal and wait for other trade options that meet low-risk criteria.
