Canada Employment Preview: Modest gain anticipated, but a surprise not off the table

Canada will publish its March employment report on Thursday, April 6. The market anticipates the country has added 12,000 new job positions after creating 21,800 in the previous month. The Unemployment Rate is foreseen ticking higher, from 5% to 5.1%, while the Participation Rate is expected to have remained stable at 65.7%.

The Bank of Canada (BoC) was the first major central bank to hit a pause in the monetary tightening path. Back in January, the BoC made its decision and stuck to it in March, maintaining its benchmark rate unchanged at 4.5%. The announcement was made just ahead of the banking crisis that quick-started in the United States with the collapse of  Silicon Valley Bank and Signature Bank, dragging Credit Suisse alongside.

It did not take long for financial markets to start wondering whether the BoC will maintain rates on hold or start trimming them before year-end to cope with the newly born global crisis, which by the way, seems contained for now. Central banks that were still on the tightening path flipped towards a more dovish approach in an attempt to stabilize the banking sector.

With that in mind, it seems unlikely the monthly employment report could impact future BoC decisions. Nevertheless, the USD/CAD pair will likely react to any deviation from expectations, with the Canadian Dollar likely to appreciate with upbeat figures, moreover considering thin market conditions ahead of the long weekend. The opposite scenario will likely happen with a dismal outcome.

USD/CAD technical outlook

The USD/CAD pair bottomed this week at 1.3406, with the Loonie appreciating on the back of rising Crude Oil prices. Oil soared at the beginning of the week on news that OPEC+ will cut oil output by roughly 1.16 million barrels per day. Additionally, broad US Dollar weakness maintains the pair near the aforementioned two-month low.

Technical readings in the daily chart suggest the upward potential remains limited, as indicators have barely recovered from near oversold readings, lacking strength enough to confirm another leg north. Furthermore, USD/CAD develops below a directionless 100 Simple Moving Average (SMA) at 1.3520, while the 20 SMA gains bearish traction far above the longer one.

A steeper decline could be expected on a break below the 1.3400 threshold, with market players targeting then the 1.3250/70 region, where the pair bottomed multiple times between November and February. Gains beyond 1.3520, on the other hand, could see the pair testing the 1.3600 mark.