Selling AUDCAD from 0.9890

Yesterday's shockingly soft Australian jobs report took a heavy toll on the national currency. AUDCAD nosedived in response, giving back all of its October gains. Over the next three days, the fundamental edge will stay with the Canadian dollar, which should keep pressing the pair lower toward solid support at 0.9760.

So, what exactly did the data reveal? The numbers from the Australian Bureau of Statistics caught traders off guard. The economy lost 39,300 jobs, contrary to forecasts of a 20,000 gain, and unemployment shot up to a five-year high of 4.7%. Most of the damage came from part-time work, which shed 73,700 positions.

And that's not all. Until now, the Reserve Bank of Australia (RBA) had worn the crown as one of the most hawkish central banks, with interest rates sitting at 4.60%. Markets had been busy pricing in another hike before year-end—but this story has fallen apart. With the labor market cooling fast, the odds are rising that the regulator will have to shift to a softer monetary stance as soon as its November 3 meeting, leaving the chances of another increase close to zero.

Now, let's look at the other side of the pair. The loonie is standing on much firmer ground. The Bank of Canada (BoC) has behaved predictably, and strong macroeconomic data from the United States—its key trading partner—has quietly propped up the currency. Add to that the fact that Brent crude is hovering around $100 per barrel due to tensions in the Middle East, and you've got a steady flow of "petrodollars" into the Great White North—putting extra weight on AUDCAD and causing more pain for the Aussie.

Since yesterday's gloom still hangs over the market, traders will likely keep dumping their AUD longs. Over the next 72 hours, any bounce will probably be sold hard. The path of least resistance points down, with 0.9760 acting as the main psychological target for bears.

The ultimate recommendation is to sell AUDCAD from 0.9890. Place Take Profit at 0.9760. Set Stop Loss at 0.9970. The potential gain is 1,300 points.

Calculate your open position so that a potential loss (protected by a Stop Loss order) is limited to 1% of your deposit. If your account balance does not allow you to enter a position of this size, it is better to skip the trade and wait for other market signals that meet low-risk criteria.