USD/CAD – Loonie Recovers as Canadian Job Numbers Sparkle, US Payrolls Comes Up Short

USD/CAD is showing strong volatility on Friday, as the Canadian dollar posted sharp gains earlier but has retracted in North American trade. Currently, USD/CAD is trading at the 1.32 line. On the release front, the spotlight is on employment numbers on both sides of the border. Canadian employment change posted a huge gain of 67.2 thousand, crushing the estimate of 8.5 thousand. The US nonfarm payroll report could not keep pace, and rose slightly to 156 thousand, well short of the forecast of 171 thousand. Average Hourly Wages edged up to 0.2%, matching the forecast. The markets will also be paying close attention as three FOMC members speak at public engagements.

US unemployment claims sparkled last week, dropping to just 249 thousand, beating the estimate of 255 thousand. Unemployment claims have come in below the forecast for 10 straight weeks, pointing to a tight labor market. Jobless filings have been below 300,000 for 83 straight weeks, marking the longest streak since 1970.

The Fed remains divided over the timing of a rate hike, and this was underscored at the September meeting, when three of the ten FOMC members voted against the decision to hold rates at 0.25%, voting instead in favor of an immediate rate hike. On Tuesday, FOMC member Jeffrey Lacker, one of seven non-voting members, said that he would have voted in favor of a rate hike at the last meeting had he been able to vote. The strong dissent in the September rate decision has not helped the credibility of the Fed, which had promised a series of rate hikes in 2016, but has opted for the sidelines since its quarter-point hike last December. Continuing mixed messages from the Fed make it difficult for the markets to ascertain what the Fed has planned regarding monetary policy and whether it will press the rate trigger in December or wait until next year.

USD/CAD Fundamentals

Friday (October 7)

• 8:30 Canadian Employment Change. Estimate 8.5K. Actual 67.2K
• 8:30 Canadian Unemployment Rate. Estimate 7.0%. Actual 7.0%
• 8:30 US Average Hourly Earnings. Estimate 0.2%. Actual 0.2%
• 8:30 US Nonfarm Employment Change. Estimate 171K. Actual 156K
• 8:30 US Unemployment Rate. Estimate 4.9%. Actual 5.0%
• 14:00 US Final Wholesale Inventories. Estimate -0.1%
• 14:30 US FOMC Member Stanley Fischer Speaks
• 16:45 US FOMC Member Loretta Mester Speaks
• 19:00 US FOMC Member Esther George Speaks
• 19:00 US Consumer Credit. Estimate 16.8B
• 20:00 US FOMC Member Lael Brainard Speaks

* Key releases are in bold

*All release times are EDT

USD/CAD for Friday, October 7, 2016

USD/CAD October 7 at 8:45 GMT

Open: 1.3221 High: 1.3297 Low: 1.3186 Close: 1.3222

USD/CAD Technical

• USD/CAD was flat in the Asian session but posted considerable gains in the European session. The pair dropped sharply early in North American trade, erasing the earlier gains.
• 1.3120 is providing strong support
•  1.3253 is a weak resistance line

Further levels in both directions:

• Below: 1.3120, 1.3028 and 1.2922
• Above: 1.3253, 1.3371, 1.3457 and 1.3551
• Current range: 1.3120 to 1.3253

OANDA’s Open Positions Ratio

USD/CAD ratio is showing little movement on Friday. Long positions have a strong majority (64%), indicative of trader bias towards USD/CAD reversing directions and moving higher.

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