USD/CAD: Weak Canadian Job Data Weighs on Loonie

The Canadian dollar is listless on Monday, as USD/CAD trades in the 1.07-range early in the North American session. On Friday, Canadian employment numbers disappointed and the Canadian dollar lost ground as a result. There are no US or Canadian releases on Monday.

Canadian employment numbers were dismal on Friday. Employment Change, one of the most important indicators, came in at -9.4 thousand, shocking the markets which had anticipated a strong gain of 20.7 thousand. Unemployment Rate disappointed, as the rate rose to 7.1%, up from 7.0% which was the market estimate. This is the highest unemployment rate we’ve seen in 2014. The weak job numbers led to the loonie shedding close to a cent and dropping to two-week lows against its US counterpart.

Canadian inflation numbers continue to stumble, pointing to an underperforming economy. New Housing Price Index gained just 0.1% last month, its weakest reading since June. This fell short of the estimate of 0.3%, which is the highest level the indicator has managed to reach in 2014. On a bright note, Canadian Housing Starts enjoyed an excellent June, coming in at 198 thousand, which was unchanged from the previous reading. This beat the estimate of 191 thousand, and marked the third straight month that the key indicator has surpassed the estimate. The indicator has surpassed the 190 thousand level in three of the past four releases, pointing to strong growth in the construction sector.

In the US, employment data continues to impress. Last week, Unemployment Claims dropped to 304 thousand, well below the estimate of 316 thousand. Employment numbers for June looked sharp, led by a jump in Nonfarm Payrolls and a drop in the unemployment rate. The strong employment numbers have increased speculation about an interest rate hike by the Federal Reserve, and remarks by Fed policymakers will be closely scrutinized as the markets look for clues as to the timing of any rate moves.

The Federal Reserve minutes did not shed much light on when the Fed plans to raise interest rates, but policymakers did agree to wind up the QE scheme by October. The asset purchase program flooded the economy with over $2 trillion, and the Fed has been steadily reducing the program since last December. Winding down QE, which currently stands at $45 billion/month, will require several more tapers by the Fed, but that shouldn’t pose a problem, given the solid employment data the economy has been churning out.

USD/CAD for Monday, July 14, 2014

USD/CAD July 14 at 14:50 GMT

USD/CAD 1.0731 H: 1.0748 L: 1.0726

USD/CAD Technical

• USD/CAD has been rangebound throughout the day.
• 1.0775 has weakened in resistance as the pair trades at higher levels.
• 1.0678 is providing support. 1.0572 is stronger.
• Current range: 1.0572 to 1.0678

Further levels in both directions:

• Below: 1.0678, 1.0572, 1.0414 and 1.0271
• Above: 1.0775, 1.0852, 1.0961 and 1.1004

OANDA’s Open Positions Ratio

USD/CAD ratio is pointing to gains in  short positions. This is not consistent with the movement of the pair, as the Canadian dollar is almost unchanged. The ratio has a substantial majority of long positions, indicative of strong trader bias towards the US dollar gaining ground.

USD/CAD Fundamentals

• There are no Canadian or US releases on Monday.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.