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USD/CAD to Eye 1.2800 Resistance on Dismal Canada Employment Report

USD/CAD to Eye 1.2800 Resistance on Dismal Canada Employment Report

David Song, Shuyang Ren,

- Canada Employment to Contract for Third Time in Last Six-Months.

- Jobless Rate to Pick-Up From Lowest Level Since 2008.

For more updates, sign up for David's e-mail distribution list.

Trading the News: Canada Net Change in Employment

A 5.0K contraction in Canada Employment paired with an uptick in the jobless may drag on the loonie and produce fresh 2015-highs in USD/CAD as it fuels speculation for a further reduction in the Bank of Canada’s (BoC) benchmark interest rate.

What’s Expected:

USD/CAD Employment

Click Here for the DailyFX Calendar

Why Is This Event Important:

Even though BoC Governor Stephen Poloz endorses a wait-and-see approach, a dismal labor report may encourage the central bank to adopt a more dovish tone at the April 15 policy meeting in order to encourage a stronger recovery.

Expectations: Bearish Argument/Scenario

Release

Expected

Actual

Housing Starts (FEB)

179.0K

156.3K

Building Permits (MoM) (JAN)

-4.0%

-12.9%

Retail Sales (MoM) (DEC)

-0.8%

-2.3%

The slowdown in private sector consumption paired with the ongoing weakness in the housing market may drag on employment, and a marked contraction in job growth may heighten the bearish sentiment surrounding the Canadian dollar as the BoC remains cautious on the economy.

Risk: Bullish Argument/Scenario

Release

Expected

Actual

Raw Materials Price Index (MoM) (JAN)

-6.3%

-7.7%

Quarterly Gross Domestic Product (Annualized) (4Q)

2.0%

2.4%

Gross Domestic Product (MoM) (DEC)

0.2%

0.3%

Nevertheless, lower input costs accompanied by the pickup in private sector activity may encourage Canadian firms to boost their labor force, and a positive development may keep the USD/CAD range intact as the BoC looks to retain its current policy over the near-term.

How To Trade This Event Risk(Video)

Bearish CAD Trade: Canada Sheds 5.0K Jobs or Greater

  • Need green, five-minute candle following the report for a potential long USD/CAD trade
  • If market reaction favors a bearish loonie trade, buy USD/CAD with two separate position
  • Set stop at the near-by swing low/reasonable distance from entry; look for at least 1:1 risk-to-reward
  • Move stop to breakeven on remaining position once initial target is met, set reasonable limit

Bullish CAD Trade: Employment Report Exceeds Market Expectations

  • Need red, five-minute candle to consider a short USD/CAD position
  • Carry out the same setup as the bearish Canadian dollar trade, just in the opposite direction

Read More:

Scalping the GBPJPY Reversal- 180.30 Support Key

AUD/USD Retail Crowd Remains Net-Short; 0.7750 in Focus

Potential Price Targets For The Release

USD/CAD Daily Chart

USD/CAD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Favor the approach to ‘buy-dips’ in USD/CAD following the bullish RSI break, but seems as though the dollar-loonie needs a fundamental catalyst for a break/close above the February high (1.2797)
  • Interim Resistance: 1.2797 (Feb. high) to 1.2800 (38.2% expansion)
  • Interim Support: 1.2390 (161.8% expansion) to 1.2420 (161.8% expansion)

Join DailyFX on Demandfor Real-Time Updates on the DailyFX Speculative Sentiment Index!

Impact that Canada Employment Change has had on CAD during the last release

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

JAN 2015

02/06/2015 13:30 GMT

5.0K

35.4K

+12

+8

JanuaryCanada Employment Change

USD/CAD Chart

The Canadian economy added 35.4K jobs in the first month of 2015 after contracting a revised 11.3K the month prior. At the same time, the jobless rate fell to an annualized 6.6% from 6.7% the month prior even as the participant rate held steady at 65.7%. Despite the better-than-expected headline print, the pickup in job growth was larger contributed to a 47.2K rise in part-time positions as full-time employment slipped 11.9K in January. Despite the better-than-expected print, the U.S. Non-Farm Payrolls report drove USD/CAD above the 1.2450 region to end the day at 1.2504.

--- Written by David Song, Currency Analyst and Shuyang Ren

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

To be added to David's e-mail distribution list, please follow this link.

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