The Canadian dollar has started the week with considerable gains. In the North American session. USD/CAD is trading at 1.2785, down 0.45% on the day.
Canada job data sizzles
Canada’s labor market is in good shape. So good in fact, that the latest job numbers indicate that the country may have reached full employment. The November employment report was outstanding. The economy created 153.7 thousand jobs, crushing the consensus of 37.5 thousand. This follows a modest October release of 31.2 thousand. The unemployment rate fell to 6.0%, down sharply from 6.7% and beating the forecast of 6.6%.
The strong numbers gave the Canadian dollar a brief boost, which rose as much as 0.75% on Friday before the weak nonfarm payrolls report dampened risk appetite and sent the Canadian dollar for a loss on the day. However, the loonie has recovered these losses on Monday and is back below the 1.28 level.
The Canadian dollar’s outlook this week will depend to a great extent on the Bank of Canada rate decision on Wednesday. The bank has been in dovish mode, reiterating that the economy still needs “considerable monetary support” and may decide to push off any tightening until the Omicron variant is brought under control. At the same time, high inflation and the red-hot labor market are factors in support of a rate hike in mid-2022.
In the US, nonfarm payrolls was soft, with a reading of 210 thousand new jobs. This was nowhere near the consensus of 534 thousand. The soft reading was cushioned by a sharp drop in the unemployment rate, which fell from 4.6% to 4.2%. This was a result of a household employment report which showed some 1.1 million jobs at been created. These two employment reports often diverge sharply, and the true state of the labor market lies somewhere in the middle.
USD/CAD Technical
- 1.2758 is under pressure in support. Below, there is support at 1.2666
- USD/CAD faces resistance at 1.2898, followed by 1.2946