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USD/CAD: Post-BoC Losses to Accelerate on Strong Canada Employment

USD/CAD: Post-BoC Losses to Accelerate on Strong Canada Employment

2017-09-08 08:30:00
David Song, Currency Strategist
Share:

- Canada Employment to Increase for Ninth Consecutive Month.

- Jobless Rate to Hold at Annualized 6.3%- Lowest Reading Since 2008.

- Sign up & Join DailyFX Currency Analyst David Song LIVE to Cover Canada’s Employment Report.

Trading the News: Canada Net-Change in Employment

DailyFX Calendar

Another 15.0K expansion in Canada Employment may fuel fresh 2017-lows in USD/CAD as it puts pressure on the Bank of Canada (BoC) to implement additional rate-hikes over the coming months.

The BoC may move to the sidelines after delivering two consecutive rate-hikes as the central bank notes ‘Future monetary policy decisions are not predetermined and will be guided by incoming economic data and financial market developments as they inform the outlook for inflation.’ Nevertheless, Governor Stephen Poloz and Co. appear to be on course to further normalize monetary in 2018 as ‘the level of GDP is now higher than the Bank had expected,’ and the central bank may continue to change its tune over the coming months as ‘growth in Canada is becoming more broadly-based and self-sustaining.’

Impact that Canada’s Employment report has had on USD/CAD during the previous print

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

JUL

2017

07/12/2017 14:00:00 GMT

12.5K

10.9K

+48

+87

July 2017 Canada Net-Change in Employment

USD/CAD 5-Minute Chart

USD/CAD Chart

The Canadian economy added another 10.9K jobs in July following the 45.3K expansion the month prior, while the Unemployment Rate unexpectedly slipped to an annualized 6.3% from 6.5% as the Participation narrowed to 65.7% from 65.9% during the same period. Nevertheless, a deeper look at the report showed the gains were led by a 35.1K expansion in full-time employment, while part-time positions narrowed 24.3K after climbing 37.1K in June. The Canadian dollar struggled to hold its ground following the mixed report, with USD/CAD clearing the 1.2600 handle to end the day at 1.2649.

How To Trade This Event Risk(Video)

Bullish CAD Trade: Canada Employment Increases 15.0K or More

  • Need a red, five-minute candle following the report to favor a short USD/CAD trade.
  • If market reaction favors a bullish loonie position, sell USD/CAD with two separate lots.
  • Set stop at the near-by swing high/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.

Bearish CAD Trade: Labor Report Continues to Disappoint

  • Need a green, five-minute USD/CAD candle to favor a short loonie position.
  • Implement the same setup as the bullish loonie trade, just in the opposite direction.

Potential Price Targets For The Release

USD/CAD Daily Chart

USD/CAD Daily Chart

Check out our USD/CAD quarterly projections in our FREE DailyFX Trading Forecasts

  • Downside targets remain on the radar for USD/CAD as it initiates a series of lower highs & lows, with the pair taking out the June 2015-low (1.2128).
  • The Relative Strength Index (RSI) also reinforces a bearish outlook at the momentum indicator preserves the negative slope from earlier this year and slips back into oversold territory.
  • In turn, a break/close below the 1.2080 (61.8% expansion) region may open up the 1.1890 (78.6% expansion) hurdle, which sits just beneath the May 2015-low (1.1920).
  • Interim Resistance:1.2770 (38.2% expansion) to 1.2830 (38.2% retracement)
  • Interim Support: 1.1890 (78.6% expansion) to 1.1920 (May 2015-low)

--- Written by David Song, Currency Analyst

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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