Labour Market Beats Expectations
Canada’s labour market delivered a stronger-than-expected result in June, with the unemployment rate falling to 6.5%. Statistics Canada reported the decline on Friday, surprising markets that had expected the rate to remain unchanged at 6.6%, the same level recorded previously.
Employment Growth Continues
The Net Change in Employment increased by 18.2K jobs in June, following a much larger 87.8K gain in May. The figure also exceeded expectations for a 10K increase, suggesting that hiring remained resilient even as the broader economy continued to show signs of slack.
Participation Rate Holds Steady
The participation rate remained unchanged at 65%, indicating that the share of Canadians either working or actively looking for work stayed stable during the month. Wage growth also accelerated, rising at an annual pace of 3.7%, compared with 3.2% in May.
Canadian Dollar Strengthens After the Data
Following the release, the Canadian Dollar maintained a positive tone. USD/CAD moved down toward the mid-1.4100s, reaching fresh monthly lows as traders reacted to the stronger labour market figures.
Expectations Before the Report
Before the release, markets had been positioned for a relatively stable jobs report. Economists expected employment to rise by 10K in June and anticipated that the unemployment rate would hold at 6.6%. The actual data came in stronger than that forecast.
BoC Still Expected to Stay on Hold
Despite the better labour market numbers, the Bank of Canada is still expected to leave its policy unchanged at its July 15 meeting. The central bank has already held rates steady for five consecutive meetings since its last rate cut in October 2025.
Central Bank Remains in Wait-and-See Mode
The June policy meeting reinforced the view that the Bank of Canada is taking a cautious approach. Policymakers appear willing to look through temporary shocks as long as underlying inflation pressures remain contained, while still monitoring risks from areas such as energy prices.
Rate Hike Bar Remains High
With the economy still showing some spare capacity, the Bank of Canada appears to have limited urgency to change course. Future decisions remain dependent on incoming data, but the threshold for another rate hike still seems relatively high.
Markets Reduce Tightening Expectations
Market participants now expect nearly 15 basis points of tightening from the Bank of Canada by the end of the year. That is down from around 35 basis points a month ago, showing that traders have scaled back expectations for a more aggressive policy path.
USD/CAD Stays in Consolidation
USD/CAD has been moving in a consolidative range since late June, trading close to its yearly highs near 1.4250. The stronger Canadian jobs data pushed the pair lower, but analysts still see the broader technical picture as important for the next move.
Technical Levels to Watch
Pablo Piovano, Senior Analyst at FXStreet, said further gains in USD/CAD now appear limited by the 1.4250 area. The pair has since moved back toward the mid-1.4100s, with sellers watching whether downside pressure can extend further.
Support Areas for USD/CAD
If selling pressure increases, Piovano sees the next relevant support near the provisional 55-day simple moving average around 1.3900. A break below that region could expose the 200-day simple moving average near 1.3850, followed by the 100-day simple moving average around 1.3820.
Deeper Downside Scenario
A more sustained pullback could bring the May low at 1.3549, recorded on May 1, back into focus. That level would represent a much deeper retracement from the recent highs near the 1.4250 zone.
Upside Resistance Remains Clear
On the upside, Piovano identifies the year-to-date peak at 1.4248, reached on June 24 and 25, as the next major resistance. A break above that level could open the door to a move toward the April 2025 high at 1.4414, recorded on April 1.
Momentum Still Supports the Trend
Piovano said momentum still favours additional gains in USD/CAD. The Relative Strength Index is hovering around 63, while the Average Directional Index is just above 52, suggesting that the underlying trend remains firm despite the latest pullback.
Jobs Data Gives CAD a Near-Term Boost
The June labour market report gave the Canadian Dollar fresh support, but the larger outlook still depends on Bank of Canada expectations, inflation data, energy prices and the broader direction of the US Dollar. For now, the stronger jobs print has pulled USD/CAD away from its yearly highs and back toward monthly lows.
