USD/CAD – Canadian dollar unchanged after strong jobs data

  • Canada Aug Jobless Rate 6.2%; Jul 6.3% vs. Aug Forecast At 6.3%
  • Canada Aug Net Jobs +22,200 From Jul vs. Aug Net Jobs Forecast At +15,000
  • Canada Aug Avg Hourly Wages +1.8% From Year Ago
  • Canada Labor Force +2,000 In Aug From Jul
  • Aug Participation Rate At 65.7% Vs 65.7% In Jul
  • Canada added jobs in August and its unemployment rate fell for a third-straight month to a fresh post-crisis low, even though full-time employment declined steeply in the month.

    Wages also rose at the fastest pace in 10 months, although still below the 2% level.

    The report indicated the economy shed -88,100 full-time jobs, but that was offset by a +110,400 increase in part-time employment.

    The CAD is trading atop of C$1.2100 just north of this week’s dollar low move (C$1.2037) after Wednesday surprise Bank of Canada (BoC) rate hike of +25 bps to +1%.

    Bank of Canada (BoC)

    Three things that Bank of Canada’s (BoC) Poloz has done with this week’s surprise rate hike:

  • A gradual approach to rate rises is now a “myth,”
  • The hike came at a decision-only meeting (without press conference)
  • and most importantly throws into the doubt the markets view that Poloz preferred a weaker CAD.
  • The BoC is now in rate “hike” cycle, but data dependent – fixed income dealers are beginning to price in +1.75% by the end of 2018.

    Intraday, CAD is very much overbought, but there is ‘no’ reason to want to sell it at the moment. C$1.2030 is very strong dollar support – the USD needs to break above C$1.2350 – C$1.25 with conviction to get any dollar traction. With another Fed rate hike being priced out this will be difficult to sustain.

    In the medium term, any USD rallies will see CAD buying to target C$1.1950-1.20. However, the “elephant” in the room remains NAFTA negotiations.

    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.

    Dean Popplewell

    Dean Popplewell

    Vice-President of Market Analysis at MarketPulse
    Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
    Dean Popplewell