Break below 0.908 could send AUDCAD to autumn lows

The AUDCAD currency pair, as expected, finished September with another rally. However, just as at the beginning of the month, the price failed to consolidate above 0.92 and entered a correction. This move has formed a double-top pattern on the daily chart, with AUDCAD approaching its neckline this week. The 0.908 level, in tandem with the 50-day exponential moving average (EMA50), has been precluding a steeper decline. But if the threshold is breached, a path toward 0.902 will open.

This level is garnering attention from bears for several reasons. First, it acted as a strong resistance, which the price unsuccessfully tried to break through for four months. It has not yet been tested from top to bottom after being breached, and now may be the perfect opportunity to do so. In addition, the uptrend from the June lows is now near the 0.902 mark, as well as the EMA200. Therefore, technical indicators do not preclude a continuation of the AUDCAD correction.

The Australian labor market has shown great stability for a long time but is now facing serious challenges. Yesterday’s data for September outlined a rise in unemployment from 4.3% to 4.5%, the highest level since November 2021. The Reserve Bank of Australia (RBA) did not expect such a weakening until at least late 2027. Under these circumstances, the regulator may be forced to ease monetary policy more actively. The probability of a rate cut at the November 4 meeting has already increased from 40% to over 70%.

On the same day, the Canadian government is scheduled to present the country's budget for the coming year. Economists surveyed by Bloomberg expect the deficit to widen from 48 to 70 billion Canadian dollars due to a significant increase in spending on construction, infrastructure, and energy. Kristalina Georgieva, head of the International Monetary Fund (IMF), has approved the plan, emphasizing Canada's relatively low level of government debt-to-GDP (52%). This allows authorities to stimulate the economy without the risk of a debt crisis.

Consider the following trading strategy:

Sell AUDCAD below the 0.908 level. Take profit: 0.902. Stop loss: 0.914.