Trading the News: Canada Net Change in Employment
A 5.0K contraction in Canada Employment paired with an uptick in the jobless may drag on the loonie and produce fresh 2015-highs in USD/CAD as it fuels speculation for a further reduction in the Bank of Canada’s (BoC) benchmark interest rate.
What’s Expected:
Even though BoC Governor Stephen Poloz endorses a wait-and-see approach, a dismal labor report may encourage the central bank to adopt a more dovish tone at the April 15 policy meeting in order to encourage a stronger recovery.
Expectations: Bearish Argument/Scenario
|
Release |
Expected |
Actual |
|
Housing Starts (FEB) |
179.0K |
156.3K |
|
Building Permits (MoM) (JAN) |
-4.0% |
-12.9% |
|
Retail Sales (MoM) (DEC) |
-0.8% |
-2.3% |
The slowdown in private sector consumption paired with the ongoing weakness in the housing market may drag on employment, and a marked contraction in job growth may heighten the bearish sentiment surrounding the Canadian dollar as the BoC remains cautious on the economy.
Risk: Bullish Argument/Scenario
|
Release |
Expected |
Actual |
|
Raw Materials Price Index (MoM) (JAN) |
-6.3% |
-7.7% |
|
Quarterly Gross Domestic Product (Annualized) (4Q) |
2.0% |
2.4% |
|
Gross Domestic Product (MoM) (DEC) |
0.2% |
0.3% |
Nevertheless, lower input costs accompanied by the pickup in private sector activity may encourage Canadian firms to boost their labor force, and a positive development may keep the USD/CAD range intact as the BoC looks to retain its current policy over the near-term.
How To Trade This Event Risk (Video)
Bearish CAD Trade: Canada Sheds 5.0K Jobs or Greater
- Need green, five-minute candle following the report for a potential long USD/CAD trade
- If market reaction favors a bearish loonie trade, buy USD/CAD with two separate position
- Set stop at the near-by swing low/reasonable distance from entry; look for at least 1:1 risk-to-reward
- Move stop to breakeven on remaining position once initial target is met, set reasonable limit
Bullish CAD Trade: Employment Report Exceeds Market Expectations
- Need red, five-minute candle to consider a short USD/CAD position
- Carry out the same setup as the bearish Canadian dollar trade, just in the opposite direction
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Potential Price Targets For The Release
Chart - Created Using FXCM Marketscope 2.0
- Favor the approach to ‘buy-dips’ in USD/CAD following the bullish RSI break, but seems as though the dollar-loonie needs a fundamental catalyst for a break/close above the February high (1.2797)
- Interim Resistance: 1.2797 (Feb. high) to 1.2800 (38.2% expansion)
- Interim Support: 1.2390 (161.8% expansion) to 1.2420 (161.8% expansion)
Impact that Canada Employment Change has had on CAD during the last release
|
Period |
Data Released |
Estimate |
Actual |
Pips Change (1 Hour post event ) |
Pips Change (End of Day post event) |
|
JAN 2015 |
02/06/2015 13:30 GMT |
5.0K |
35.4K |
+12 |
+8 |
The Canadian economy added 35.4K jobs in the first month of 2015 after contracting a revised 11.3K the month prior. At the same time, the jobless rate fell to an annualized 6.6% from 6.7% the month prior even as the participant rate held steady at 65.7%. Despite the better-than-expected headline print, the pickup in job growth was larger contributed to a 47.2K rise in part-time positions as full-time employment slipped 11.9K in January. Despite the better-than-expected print, the U.S. Non-Farm Payrolls report drove USD/CAD above the 1.2450 region to end the day at 1.2504.