USD/CAD In Crossfire Of Today's Employment Reports

USD/CAD In Crossfire Of Today's Employment Reports

Matt Simpson  | Jan 10, 2020 09:26

With both the U.S. and Canada releasing employment figures today, USD/CAD warrants a look.

Data has generally undershot expectation for Canada since the end of November. Given the Bank of Canada has a base rate of 1.75%, it appears to be only a matter of time before they’re forced to lower rates. Yet Governor Stephen Poloz seems to think otherwise.

Despite dovish remarks from Assistant Governor Gordon Wilkinson in November, Poloz refused to play along and has retained his neutral stance in the face of weak data, even as recently as yesterday’s ‘fireside’ talk. (Personally, I think ‘Poloz and friends’ would make a great title, but hey).

Citing "bad weather and strikes" as a source for weak Q4 data, Poloz also thinks that business investment may be much stronger than originally anticipated. If so, then we’ll have to revise our expectations for the BoC to cut, but it doesn’t change the fact that the U.S. data is outperforming expectations relative to Canada. And this could place upside pressure on USD/CAD if this trend persists.

In last month’s employment report, Canadian unemployment rose to 5.9% (5.8% prior, 16-month high) and 71.2k lost making it the largest monthly drop since 2009. So for CAD’s perspective, this is what to watch out for:

USD/CAD Bullish: If unemployment remains at or above 5.9% and we see another large decline in jobs, it suggests that November’s data was not an outlier and there could be worse to come. If this is coupled with an okay (or better) employment set from the US, we’d expect USD/CAD to break above 1.3103 with relative ease

USD/CAD bearish: However, expectations are for unemployment to revert to 5.8% and see +25k jobs added. We shouldn’t even need to see data exceeded expectations for this to be CAD positive (USD/CAD negative) as it suggests that November’s report was an outlier and that Poloz may be right to keep his neutral stance. Obviously, if this is coupled with stronger than expected data from Canada and weaker from the U.S., it only adds to the bearish case for USD/CAD.

USD/CAD Daily: Wednesday’s close above the 2019 low showed that mean reversion was underway, with yesterday’s high breaching the December trendline and testing 1.3103 resistance. However, the bearish hammer closed beneath the trendline and shows a hesitancy to move higher ahead of today’s employment line-up. Trading around mid-way between 1.3000 – 1.3100, we could find prices remains between this zone if reports from U.S. and Canada are mixed. It will, therefore, likely take a clear divergence between the U.S. and Canadian employment reports to see the 1.3015 – 1.3100 range be broken today.

USD/CAD Intraday: A bearish engulfing candle / 2-bar reversal has formed on the 4-hour chart. The 1.3100 handle held and there’s also the 200-period eMA just above, so it could take a strong U.S. beat and Canadian miss for these levels to break with conviction.

Switching to the 15-minute chart, it’s worth noting that prices remain anchored to the pivot point S1 and R1 sit on structural levels. This provides a clear range for intraday traders to consider trading within, with a relatively unobscured view.

Matt Simpson

Related Articles

Latest comments

Add a Comment
Please wait a minute before you try to comment again.
Mostafa Shafa
Mostafa Shafa

hey Mattwith job numbers out, are you still bullish on loonie (USDCAD)?  ... (Read More)

Jan 10, 2020 16:57 GMT· Reply
Discussion
Write a reply...
Please wait a minute before you try to comment again.

Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

English (USA) English (UK) English (India) English (Australia) English (South Africa) English (Philippines) English (Nigeria) Deutsch Español (España) Español (México) Français Italiano Nederlands Polski Português (Portugal) Português (Brasil) Русский Türkçe ‏العربية‏ Ελληνικά Svenska Suomi עברית 日本語 한국어 中文 香港 Bahasa Indonesia Bahasa Melayu ไทย Tiếng Việt हिंदी
Sign out
Are you sure you want to sign out?
NoYes
CancelYes
Saving Changes

+