Canadian jobs preview: high hopes are based in reality as the USD/CAD is looking for a direction

Canada is expected to post a second consecutive month of upbeat job gains.
The high hopes for the April are based on other positive data but may lead to disappointment.
The USD/CAD is looking for a new direction, and this report may supply it.

Yohay Elam FXStreet

Canada publishes its jobs report on Friday, May 11th, at 12:30 GMT. The labor data is released one week after the US Non-Farm Payrolls figures, giving Canada the full attention and allowing the USD/CAD to respond exclusively to the Canadian numbers.

Expectations stand at a gain of 36,100 positions in April, better than the increase of 32,200 jobs in March. These numbers are good in absolute terms and come after several months of rocky numbers. The employment reports for November and December showed gains of around 79,000 and January saw a plunge of 88,000 positions. February saw a return to normal ranges with 15,400, which was a disappointment at the time. And as mentioned earlier, March already saw a solid and believable gain in positions that go hand in hand with an improvement in the economy.

An increase of 36,100 in the April report is in line with the recovery but may be too optimistic. A gain of below 30,000 would, therefore, be a disappointment that could lead to a sell-off in the Canadian Dollar. A rise of 40,000 positions or more would confirm the renewed strength of the Canadian economy and could boost the loonie.

Canada's unemployment rate is also eyed. It is expected tor remain at 5.8% also in April. The Participation Rate is also forecast to continue unchanged at 65.5%. Any change in these parameters can have an impact on the loonie.

Another factor to take into account is the division between full-time and part-time jobs. The numbers tend to swing quite sharply from month to month. If more full-time positions are gained, it is favorable for the Canadian Dollar, and more part-time positions would be somewhat adverse.

USD/CAD positioning

The jobs report not only has the spotlight but also comes when the USD/CAD is looking for a new direction after a couple of weeks in a relatively tight range. Trump's announcement about abandoning the Iran deal (JCPOA) was a double-edged sword for the Canadian Dollar. The sanctions on the oil-producing Middle-Eastern country weigh resulted in slightly higher oil prices, and this is positive for the C$. On the other hand, the concerns that arise from the move triggered a risk-off sentiment that is unfavorable to the loonie.

A more formidable factor for the USD/CAD is US bond yields which support the US Dollar and keep the pair bid. This has nudged it above range but was not enough to push it over the all-important $1.3000 level.

All in all, the USD/CAD has been moving higher, but the jobs report will likely have the upper hand in directing the next moves for the pair.

USD/CAD Lines to watch

USD CAD Daily chart ahead of jobs report May 2018

The 1.3125 is the 2018 peak. 1.3050 supported the pair when it traded at higher ground. 1.30 is not only a round line but also a double top on the chart.

1.2945 held the pair down in early April while 1.2915 capped the pair April and May. Further down, 1.2800 is a round level and also support the pair in late April. 1.2760 was a swing high earlier.

More: USD/CAD to 1.30? Not so fast — Confluence Detector

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

GBP/USD surrenders some gains, back to 1.3420

GBP/USD holds on to moderate gains above 1.3400 the figure on Friday. Optimism surrounding the UK government’s leadership transition and expectations of further BoE tightening support the British Pound, while easing tensions in the Middle East and fading Fed rate-hike expectations weigh on the US Dollar.

EUR/USD turns positive, targets 1.1450

EUR/USD now picks up pace and advances toward the 1.1440 region on Friday, up modestly for the day. With no major economic data due, lingering uncertainty over the US-Iran conflict keeps investors cautious, limiting the pair's upside.

Gold remains offered, still below $4,100

Gold struggles to extend Thursday’s rebound and navigates below the $4,100 mark per troy ounce on Friday. Uncertainty surrounding the Middle East conflict limits the precious metal’s upside, which is also under pressure amid rising US Treasury yields across the curve.

Week ahead – US CPI and Warsh testimony to take centre stage, BoC eyed too

US inflation report and Warsh testimony to headline the week. Dollar to dominate amid slew of other US data and Mideast tensions. Amid fresh Iran escalation, China GDP to shed light on Q2 impact. Bank of Canada not expected to follow RBNZ with rate hike.

Five sessions, one round trip: Why the whipsaw is exactly what Warsh ordered

Markets opened July with a December hike as the base case and spent five trading sessions unlearning and relearning it. A 57K payrolls print bled the tightening bets out of the strip; a re-shut Strait of Hormuz is pushing them back in. Wednesday's minutes from the June Federal Open Market Committee meeting landed mid-round-trip, describing a world that had already stopped existing.

Five sessions, one round trip: Why the whipsaw is exactly what Warsh ordered

Markets opened July with a December hike as the base case and spent five trading sessions unlearning and relearning it. A 57K payrolls print bled the tightening bets out of the strip; a re-shut Strait of Hormuz is pushing them back in. Wednesday's minutes from the June FOMC meeting landed mid-round-trip, describing a world that had already stopped existing.