USD/CAD In The Crossfire Of Today's Employment Reports

USD/CAD In The Crossfire Of Today's Employment Reports

With both the US and Canada set to release employment figures at 13:30 GMT, USD/CAD warrants a glance .

Data has generally undershot expectation for Canada since the top of November. Given BOC have a interest rate of 1.75%, it appears to be only a matter of your time before they’re forced to lower rates. Yet Poloz seems to think otherwise.

Despite dovish remarks from Assistant Governor Wilkinson in November, Governor Poloz refused to play along and has retained his neutral stance within the face of weak data, whilst recently as yesterday’s ‘fireside’ talk. (Personally, i feel ‘Poloz and friends’ would make an excellent title, but hey).

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

In last month’s employment report, Canadian unemployment rose to five .9% (5.8% prior, 16-month high) and 71.2k lost making it the most important monthly drop since 2009. So for CAD’s perspective, this is often what to observe out for:

USD/CAD Bullish: If unemployment remains at or above 5.9% and that we see another large decline in jobs, it suggests that November’s data wasn't an outlier and there might be worse to return . If this is often including an okay (or better) employment set from the US, we’d expect USD/CAD to interrupt above 1.3103 with relative ease

USD/CAD bearish: However, expectations are for unemployment to revert to five .8% and see +25k jobs added. We shouldn’t even got to see data exceeded expectations for this to be CAD positive (USD/CAD negative) because it suggests that November’s report was an outlier which Poloz could also be right to stay his neutral stance. Obviously, if this is often including stronger than expected data from Canada and weaker from the US, 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 maneuver higher before 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 US and Canada are mixed. it'll therefore likely take a transparent divergence between the US and Canadian employment reports to ascertain 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 robust US beat and CA miss for these levels to interrupt 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 transparent range for intraday traders to think about trading within, with a comparatively unobscured view.