The Canadian dollar is trading quietly in the Thursday session. Currently, USD/CAD is trading at 1.2570, down 0.016% on the day. On Friday, both Canada and the US release key employment reports, so we could see strong strong movement from the Canadian dollar before the weekend.
The US will release nonfarm payrolls, one of the most highly anticipated events on the data calendar. The consensus is around 450 thousand new jobs for September, which would be a significant improvement over the August release of just 235 thousand. The upcoming release has added significance because the Fed appears committed to tapering and is looking for strong economic data before pressing the trigger.
An NFP reading of 500 thousand or more would likely result in the Fed tapering in November or December. That means that a strong NFP should give a lift to the US dollar. Conversely, a reading below 500K could add to the uncertainty over the timing of a taper and weigh on the US dollar. The wage growth release should also not be ignored. If the forecast of 0.4% is widely missed, it could affect the movement of USD/CAD.
Canada also releases key employment data on Friday. The economy has been struggling, as reflected by GDP, which has reeled over four straight months of negative growth. In August, the economy created 95 thousand jobs, but that is expected to slow to about 60 thousand for September. Unemployment is forecast to drop to 6.9%, down from 7.1%. If these releases are stronger than anticipated, the Canadian dollar could gain ground, depending of course on the US employment report.
The Bank of Canada will also be closely monitoring Friday’s job releases. Strong Canadian job numbers would point to an improving recovery and would support the case to raise rates sooner rather than later. Like the Federal Reserve, the BoC will want to see solid data and ensure that the recovery is on a strong footing before tightening policy.
- USD/CAD is testing support at 1.2565. Below, there is support at 1.2489
- There is resistance at 1.2745 and 1.2849
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