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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.

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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

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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

Housing Starts (FEB)179.0K156.3K
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

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:

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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)

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

PeriodData ReleasedEstimateActualPips ChangePips Change
JAN 201502/06/2015 13:30 GMT5.0K35.4K+12+8

JanuaryCanada Employment Change


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 Follow me on Twitter at @DavidJSong.

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