The Canadian dollar has started the week in negative territory. In the North American session, USD/CAD is trading slightly below the 1.27 line. There are no scheduled Canadian releases this week, so US events will have a magnified impact on the movement of USD/CAD.
Canada employment data improves
The Canadian dollar ended the week on a positive note, as USD/CAD dropped by 0.66% on Friday. A mix of strong Canadian job numbers and a soft US nonfarm payroll boosted the Canadian currency. Canada’s economy produced 54.7 thousand new jobs, crushing the consensus of 24.5 thousand. The unemployment rate fell from 6.0% to 5.9%, its lowest level since February 2020, just before Covid struck the economy. As well, wages jumped 6.3% y/y. Canada’s employment is now some 240 thousand above the pre-Covid level, which means that the labor market has fully recovered from Covid and then some.
December job numbers in the US were mixed. The nonfarm payrolls report was a major disappointment, with a gain of 199 thousand, compared to a forecast of 425 thousand. On the positive side, the unemployment rate dropped from 4.2% to 3.9% and wage growth climbed 4.7% y/y, above the estimate of 4.2%. As we saw with the JOLTS Jobs Openings release last week, there are jobs to be had, but the difficulty is finding workers to fill the vacancies. The mixed jobs report is unlikely to change the Fed’s lift-off date from mid-2022, although that could change based on inflation and the strength of the economy.
The soft nonfarm payrolls report did not affect risk sentiment, as the major currencies were able to make inroads against the US dollar. Strong risk appetite helped the Canadian dollar rise over 1% in December, as has the rally in oil and industrial metals.
- USD/CAD faces resistance at 1.2762. Above, there is resistance at 1.2879
- There are support levels at 1.2579 and 1.2513
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