USD/CAD relies on US data as BoC set to shrug off disappointing Canadian jobs report – TDS

The July Labour Force Survey came in weaker than expected with the Canadian economy adding 94K jobs during the month, falling short of the market consensus for 150K. USD variation has seen a tightening in correlation with relative US data surprise performance. As such, analysts at TD Securities think this is likely to dominate price action in USD/CAD, but well-defined ranges are set to be respected until we emerge out of the summer.

Canadian Employment underwhelms in July

“The Canadian economy added 94K jobs in July, falling short of the market consensus for 150K as the unemployment rate fell to 7.5% and hours worked rose 1.3%. Growth was led by services (+93K), with full-time employment making up most (+83K) of the new jobs.”

“While Canadian jobs underwhelmed, we do not expect this to fundamentally alter the BoC's stance. Moreover, the CAD has shown more deference to reflation proxies and (unsurprisingly) broad USD variation than it has to domestic data surprises.” 

“Given the US payrolls beat, we would expect USD price action to dominate, particularly as the USD has become more sensitive to US relative data surprise performance. There, a modest upside surprise should not terribly unnerve USDCAD, especially as summer trading conditions make it difficult to extrapolate. 

“Given the Fed and macro overlay, we are inclined to think that well-defined ranges should be respected for now; 1.2420/30 and 1.2830 (200-DMA).”