Canadian Dollar eyes Canadian, US jobs data

The Canadian dollar has edged lower on Friday. In the European session, USD/CAD is trading at 1.3793, down 0.19% on the day. We could see stronger movement from the Canadian dollar later in the day, as Canada and the US release the August employment reports.

Canada's employment expected to rebound

Canada's labor market took a beating in July, with the loss of 40.8 thousand jobs, including 10 thousand job losses in manufacturing. The markets expect a rebound in August, with an estimate of 7.5 thousand new jobs. The unemployment rate is expected to tick up to 7.0% from 6.9%.

The weak July reading was directly attributable to the US tariffs, which have hurt the Canadian economy. The US has slapped 35% tariffs on many Canadian products and Canada ships some 75% of its export to its southern neighbor. The two sides are yet to reach a trade agreement but Canada can ill afford a protracted trade war with the US.

Markets brace for weak US NFP

All eyes are on today's US employment report. With inflation largely under control, Nonfarm Payrolls are closely monitored and could move the US dollar.

The markets are expecting virtually no change in Nonfarm Payrolls, with an estimate of 73 thousand for August after a gain of 75 thousand in July. The labor market is clearly cooling as employers remain cautious in an uncertain economic environment. The unemployment rate is expected to edge up to 4.3% from 4.2%, which would be the highest level since December 2021.

The Federal Reserve is virtually certain to lower rates at the September 17 meeting, but a weak Nonfarm Payrolls report would likely lead to calls for the Fed to respond with a jumbo half-point cut.

USD/CAD technical

• USDCAD has pushed below support at 1.3798 and is testing 1.3798. Below, there is support at 1.3784.
• There is resistance at 1.3819 and 1.3826.