Due to both the US and Canadian employment figures being released simultaneously, the USD/CAD is the 'go to' currency for me today.
I don't expect today's payroll numbers to provide the same level of volatility we saw during yesterday's ECP rate decision and press conference. However as we have both US and Canadian employment figures released simultaneously then USD/CAD is the 'go to' currency for me today.
Last month's NFP, upon release, looked very positive indeed. With a consensus of 216k jobs created, the release of 288k jobs was the highest release since June 2010 and was the 4th consecutive month of increased employment. At the same time the unemployment rate smashed forecasts of 6.6% to come in at 6.3%, its lowest level since October 2008.
However, within 15 minutes of the release USD was violently sold off across the board to finish down for the day. So what caused this reversal?
It turned out the participation rate was particuarly poor which resulted in a USD reversal and money flowed out of risky assets such as equities, AUD and NZD and into safe havens such as the CHF, JPY and Gold. SO whilst the headline figure is imprtant it pays to also keep an eye on the additional figures that get released and often overlooked.
NUMBERS FOR TODAY's RELEASE
Unemployment claims, released weekly, whilst edged up slightly higher this week at 12k vs 309k expected, sits at levels prior to the Financial Crisis.
ADP employment change came in at 179k vs 217k expected but overall has fluctuated between +140k-240k jobs created over the past 6 months. Although intended to mimic the government jobs numbers to held estimate future releases, historically is had a great track record of managing to predict NFP. However, when put alongside NFP it is a reminder that jobs are being created and the sector is healthier than it was.
Unemployment is forecast higher this month at 6.4% with a slower rate of job creation of +214k compared with +288k last month. Typically I find we need a deviation of +/- 60k jobs from forecast to see a more meaningful move from the Greenback, which means I'd like to see around +275k jobs to become USD bullish or -155k jobs to become USD bearish.
Typically we tend to see Unemployment come in around +/- 0.1% from consensus, so alongside the NFP numbers I'd consider Unemployment of 6.2% or less to provide a more convincing USD bullish move and 6.6% or more for USD bearishness.
Canadian unemployment is forecast to remain stable at 6.9% with Employment change forecast at a 2-month high of 24.k jobs created.
USD/CAD TECHNICALS
Technically, I am bullish on USD/CAD and suspect we have seen a significant swing low above 1.08 and we are now back in line with the weekly bullish trend. However whilst we remain below 1.094 resistance I favour a retracement towards 1.088 before a resumption of the uptrends. To help this scenario we would require weaker USD employment figures and/ or stringer Canadian employment figures.
To achieve a 'cleaner' trend and more substantial move I would like to see either of the following two scenario's.
USDCAD Bullish:
- NFP 275k and US unemployment 6.3% or less
- CAD unemployment rate 6.9% or more and Employment change below 24.5k
USDCAD Bearish
- NFP 155k or less and US unemployment 6.4% or more
- CAD unemployment 6.8% or less and Employment change 24.5k or above
Where it becomes complicated is if we see a mixture of bullish and bearish employment figures between the two currencies. Under this scenario I would expect price action to be choppy and indecisive, in which case I would prefer not to trade this pair. After the release has occured, if I can see a clear technical picture where fundamentals agree then I will look to enter upon intraday timeframes to trade towards S/R levels in line with my USD/CAD bullish/bearish bias.