Despite a disappointing U.S. jobs report, the USD CAD is trading sharply higher due to an unexpected decline in the Canadian jobs market. The news out of Canada reflects its first job losses of the year.
Today’s Canadian jobs report showed that the economy lost 9,300 jobs in July while the unemployment rate unexpectedly rose to 8 percent from 7.9 percent. Analysts had predicted an increase of 15,000 jobs after a strong gain of 93,200 in June.
The Canadian Dollar fell on the bad jobs data as traders speculated the weakening U.S. economy would have an adverse affect on the Canadian economy going forward.
Based on the drop in yields and the rise in Canadian bond prices, investors are beginning to price in the possibility that the country’s recovery from the recession is starting to cool and could encourage the Bank of Canada to refrain from additional interest rate hikes over the near-term.
The weak U.S. jobs data has the British Pound in a position to challenge the high for the week at 1.5967. A move through this level will take out a swing top and a .618 retracement level. This move is likely to trigger stops and an acceleration to the upside.
The Euro has resumed its uptrend with the trade through the last main top at 1.3262. Upside momentum is building which could drive this market to the major .618 retracement level at 1.3510. The main trend will remain higher as long as the main swing bottom at 1.3119 holds as support.
Traders are watching the USD JPY this morning. The weak outlook for the U.S. economy and the shedding of higher risk assets is putting pressure on the Dollar/Yen. This morning this pair tested the November 2009 bottom at 84.83. A break through this level is likely to trigger an acceleration to the downside. Traders are approaching this level with caution, however, because of the threat of an intervention by the Japanese government. There may be a technical bounce when this level is tested, leading to a possible intraday short-covering rally.
