The Canadian dollar has posted modest gains in the Monday session. Currently, USD/CAD is trading at 1.2452, down 0.15% on the day.
Sharp Canada jobs sends loonie higher
On Friday, the focus was on jobs data on both sides of the border. In the US, there was plenty of hype around the September nonfarm payrolls, but in the end the report under-delivered. The economy created just 194 thousand new jobs, nowhere near the consensus of around 500 thousand. However, there was positive news as well. Unemployment fell to 4.8%, down from 5.1% previously. As well, wage growth climbed 0.6%, up from 0.4%. The strong wage gains provide further ammunition to the argument that high inflation is not so transient after all. On a year-to-year basis, wages were up 4.6%. With inflation running at a 30-year high, the Fed’s stance that inflation will soon ease is becoming somewhat hollow.
The sharp unemployment and wage growth readings helped soothe any fears that the weak nonfarm payrolls reading might cause a ‘taper off’. The Fed will want to begin tapering ahead of expected rate hikes in 2022, and December seems a likely start-off for tapering, even though back-to-back NFP reports have been on the low side and below expectations.
It was a different story in Canada, where job creation surprised on the upside, with a strong read of 157 thousand, compared to the forecast of 60 thousand. A milestone of sorts was reached, as the number of jobs in the country has now reached the pre-pandemic level (February 2020). The unemployment rate fell from 7.1% to 6.9%, which is also the lowest level since the pandemic started. The strong Canadian numbers and positive reaction to the US job numbers sent the Canadian dollar higher on Friday. USD/CAD fell 1.39% last week, as the Canadian dollar enjoyed its best week since August.
- 1.2400 has weakened in support as the Canadian dollar has strengthened. This line has held since July. Below, there is support at 1.2325
- There is resistance at 1.2602. This is followed by resistance at 1.2729
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