USD/CAD – Canadian dollar under pressure ahead of key job data

The Canadian dollar is under pressure, after posting losses throughout the week. On Friday, the pair is trading at 1.3461, up 0.04% on the day. On the release front, the focus will be on job numbers, with key indicators on both sides of the border. Canadian employment change is expected to gain a negligible 0.3 thousand, while the U.S. releases wage growth and nonfarm payrolls. Traders should be prepared for some movement from USD/CAD in the North American session.

The U.S. labor market is in very good shape, but the markets are anticipating mixed results on Friday. Wage growth is expected to improve to 0.3%, but nonfarm payrolls are projected to fall sharply to 180 thousand. Nonfarm payrolls have been above the 300-thousand level for the past two months, and a sharp decline could result in some volatility for the pair.

With growing concerns that the U.S. economy could slow down in 2019, the Federal Reserve has shifted to a dovish stance, and could opt to freeze rates until the second half of the year. Fed chair Powell has said the bank would exercise patience before any rate hikes. Earlier this week, Boston Fed President, said that there was some downside risk to the U.S. economy and called on policymakers to be “patient” for several more meetings in order to evaluate the risks to the economy. Without being explicit, Rosengren appears to support the Fed remaining on the sideline for the upcoming policy meetings until the Fed can better gauge the health of the U.S. economy.

As expected, the Bank of Canada stayed on the sidelines and maintained the benchmark rate at 1.75%, where rates have been pegged since October. The rate statement was dovish, as policymakers dropped a reference to rates rising over time. Instead, the bank said that the economy will continue to require stimulus and said that there was “increased uncertainty” about future rate hikes. The pessimistic language is a result of the economic slowdown, which has been worse than the bank anticipated. The BoC’s dovish tone has reinforced market expectations that the bank will not raise rates in the near future, and could lower rates if the economy continues to weaken. Canada’s GDP contracted by 0.1% in November and December, and another decline could send the Canadian dollar even lower. Elsewhere, Canadian Ivey PMI dropped sharply to 50.1 in January, down from 54.7 a month earlier. The soft reading points to a weakness in the Canadian economy.

Draghi releases the doves and not the hounds

USD/CAD Fundamentals

Friday (March 8)

• 8:30 Canadian Employment Change. Estimate 0.6K
• 8:30 Canadian Unemployment Rate. Estimate 5.8%
• 8:30 Canadian Utilization Rate. Estimate 82.1%
• 8:30 Canadian Housing Starts. Estimate 204K
• 8:30 US Average Hourly Earnings. Estimate 0.3%
• 8:30 US Nonfarm Employment Change. Estimate 180K
• 8:30 US Unemployment Rate. Estimate 3.9%
• 8:30 US Building Permits. Estimate 1.29M
• 8:30 US Housing Starts. Estimate 1.19M
• 22:00 US Federal Chair Powell Speaks

*All release times are EST

*Key events are in bold

USD/CAD for Friday, March 8, 2019

USD/CAD, March 8 at 6:50 EST

Open: 1.3441 High: 1.3467 Low: 1.3444 Close: 1.3461

USD/CAD Technical

USD/CAD has showed little movement in the Asian and European sessions

• 1.3445 was tested earlier in support. It is a weak line
• 1.3552 is the next resistance line
• Current range: 1.3445 to 1.3552

Further levels in both directions:

• Below: 1.3445, 1.3383, 1.3290 and 1.3200
• Above: 1.3552, 1.3662 and 1.3722

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