USD/CAD pulls back to levels near 1.4100 with Canadian jobs on tap

The US stalls below 1.4140 against the Canadian Dollar, following a six-day rally.
Canada's employment is expected to show a 2,500 net loss in October.
In the US, Fed's Jefferson and the Michigan Consumer Sentiment Index will grab the focus.

Guillermo Alcala FXStreet

The US Dollar has lost some momentum on Friday’s European trading session, and the USD/CAD pulled back to the 1.1410 area from session highs at 1.4125. The pair's rally from last week's low below 1.3900 was capped at 1.4140 earlier in the week, and is looking for direction ahead of Canada’s employment data.

The Greenback drew support on Thursday from the risk-averse sentiment as the main Wall Street indices tanked, with tech stocks leading losses, amid revived fears of an AI bubble. The negative market sentiment has extended into Asia and Europe, although market volatility remains muted so far.

US employment data disappoints

US private data released on Thursday revealed that the economy destroyed employment in October due to cost-cutting plans from businesses and the adoption of AI technologies. These figures offset the moderate optimism after the better-than-expected US ADP Employment report seen on Wednesday.

In Canada, the focus today is on October’s Employment report, which is expected to show a 2,500 net loss in employment, following a 60,400 increase in September. The Unemployment Rate is expected to remain steady at 7.1%, but these figures might add pressure on the BoC to lower interest rates further.

In the US, the comments of the Federal Reserve vice chair Philip Jefferson might provide some clues about the central bank’s monetary policy plans for December’s meeting, although the highlight of the day is the Michigan Consumer Sentiment Index, which is expected to have deteriorated for the fourth consecutive month.

Economic Indicator

Net Change in Employment

The Net Change in Employment released by Statistics Canada is a measure of the change in the number of people in employment in Canada. Generally speaking, a rise in this indicator has positive implications for consumer spending and indicates economic growth. Therefore, a high reading is seen as bullish for the Canadian Dollar (CAD), while a low reading is seen as bearish.

Why it matters to traders?

Canada’s labor market statistics tend to have a significant impact on the Canadian dollar, with the Employment Change figure carrying most of the weight. There is a significant correlation between the amount of people working and consumption, which impacts inflation and the Bank of Canada’s rate decisions, in turn moving the C$. Actual figures beating consensus tend to be CAD bullish, with currency markets usually reacting steadily and consistently in response to the publication.

Economic Indicator

Unemployment Rate

The Unemployment Rate, released by Statistics Canada, is the number of unemployed workers divided by the total civilian labor force as a percentage. It is a leading indicator for the Canadian Economy. If the rate is up, it indicates a lack of expansion within the Canadian labor market and a weakening of the Canadian economy. Generally, a decrease of the figure is seen as bullish for the Canadian Dollar (CAD), while an increase is seen as bearish.

EUR/USD struggles to regain momentum in the low1.1600s

EUR/USD is giving some signs of life in the aftermath of two severe days of losses on Wednesday, reclaiming the 1.1600 hurdle and above on the back of the resurgence of a mild selling bias around the US Dollar. Moving forward, the usual US weekly Claims will take centre stage on Thursday ahead of Friday’s crucial NFP data.

GBP/USD appears bid around 1.3370

GBP/USD reverses part of its recent multi-day decline, gathering some balance and managing to reach the 1.3400 region, where some initial resistance seems to have turned up. Cable’s uptick comes in response to some loss of momentum in the Greenback despite the geopolitical scenario remaining fragile.

Gold recovers modestly despite intensifying Middle East crisis

Gold keeps its daily gains well in place, although a break above the $5,200 mark per troy ounce still remains elusive on Wednesday. The yellow metal’s rebound comes in response to the persistent flight-to-safety amid intense geopolitical tensions in the Middle East and the bearish performance of the US Dollar.