Canadian Jobs Preview: Erratic figures set to shape USD/CAD's battle with 1.20


Share:
  • Canada is expected to report a loss of around 20,000 jobs in May.
  • Wild swings in data open the door to an upside surprise. 
  • The figures – alongside US Nonfarm Payrolls – are critical for USD/CAD's battle over 1.20.

How low can USD/CAD go? The currency pair has already hit the lowest since May 2015, but there might be more in store. The Canadian dollar has been benefiting from rising oil prices, hopes for a robust recovery in the US – Canada's critical trade partner – but what about the local labor market?

Despite advances in its vaccination campaign, Canada suffered a new wave of COVID-19 cases earlier in the year, resulting in local lockdowns. That is the main explanation for the loss of 207,100 jobs in April. Another reason for the massive labor destruction comes from previous gains – that nation saw an accumulated increase of 562,300 positions in February and March.

The chart below shows the pre-crisis calm and the wild changes afterward:

Source: FXStreet 

The immunization campaign's pickup and better weather have since contributed to a sharp drop in cases, which led to the easing of restrictions.

This improvement reflected below, implies that Canada may have gained jobs rather than lost them last month.

Source: FT

USD/CAD Reaction

If the assumption above proves correct and a plus sign accompanies the Employment Change figure, the Canadian dollar has room to rise. However, for a meaningful move in USD/CAD, there are additional components to consider.

First and foremost, US Nonfarm Payrolls – America's labor statistics are published at the same time, and they tend to have the upper hand in rocking markets. A big beat in the US could push Dollar/CAD higher even if Canada's labor market springs back. Conversely, a disappointing employment number up north could still be followed by a drop in USD/CAD if the NFP misses for a second consecutive time. 

The second factor is oil prices, which have been marching higher and keeping the loonie bid. However, an OPEC+ decision to increase the output of the black gold – and consequent market reactions – could also rattle the C$.

Third, technical positioning is critical. At the time of writing, USD/CAD dipped below the 2017 low of 1.2060 but maintains a safe distance from the round 1.20 level. It is safe to assume that traders have positioned themselves around this psychological barrier. Will a move below 1.20 result in an avalanche or will be firmly rejected? One thing looks certain – volatility is set to be high. 

The USD/CAD monthly chart shows that 1.1920 is the next defense before a potential plunge to 1.13. In general, 1.20 is critical battle line.

Conclusion

Canada is recovering and another month of job losses seems pessimistic. A potential upside surprise in labor figures is only one of several factors moving USD/CAD amid its battle around 1.20. 

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Follow us on Telegram

Stay updated of all the news

Join Telegram

Recommended Content


Follow us on Telegram

Stay updated of all the news

Join Telegram

Recommended Content

Editors’ Picks

EUR/USD posts lowest daily close since December Premium

EUR/USD posts lowest daily close since December

A strong US Dollar sent EUR/USD to reach a new low at 1.0488. The pair later stabilized around 1.0500, marking the lowest daily close since December 2022. The overbought US Dollar remains robust, driven by risk-off sentiment. Spain and Germany are set to release inflation data on Thursday.

EUR/USD News

GBP/USD rebounds modestly to 1.2150

GBP/USD rebounds modestly to 1.2150

 

GBP/USD reached a new multi-month low at 1.2110 and then rebounded modestly, finding resistance at the 1.2150 area. A strong US Dollar, suppored by risk aversion and higher Treasury yields, keeps the pair under pressure.

GBP/USD News

Gold collapses below $1,900 as fears back the USD Premium

Gold collapses below $1,900 as fears back the USD

Gold price turned south and dropped below $1,880 for the first time since March on Wednesday. After a downward correction in the European session, the benchmark 10-year US Treasury bond yield regained traction and rose toward 4.6%, causing XAU/USD to stretch lower.

Gold News

Top 3 Price Prediction: BTC upward potential under threat

Top 3 Price Prediction: BTC upward potential under threat

Bitcoin (BTC) along with Ethereum (ETH) and Ripple (XRP) prices are all at Catch-22 moments, testing key levels that will determine the next directional bias. Depending on how bulls play their hand, the next few hours could be a make or break moment for the top three leading cryptos.

Read more

Dow Jones Industrial Average Forecast: Risk of US government shutdown sends DJIA lower

Dow Jones Industrial Average Forecast: Risk of US government shutdown sends DJIA lower

The Dow Jones Industrial Average (DJIA) loses more ground on Wednesday. Anxiety is still top of mind with rebellious members of the US House of Representatives refusing to allow continuing spending bills to reach the floor for a vote.

Read more

Majors

Cryptocurrencies

Signatures