USD/CAD – Canadian Dollar Dips on Strong US Wage Growth Report

USD/CAD has posted gains on Friday, as the markets digest key employment numbers out of the US and Canada. Early in the North American session, the pair is trading at 1.3430. US nonfarm payrolls improved to 161 thousand, but this fell short of the forecast of 171 thousand. Average Hourly Earnings rose 0.4%, edging above the estimate of 0.3%. In Canada, the economy added 43.9 thousand jobs, crushing the estimate of a loss of 10.0 thousand. However, all of the gains were part-time jobs as the economy actually shed 23 thousand full time positions. Unemployment rates remained unchanged in both Canada and the US. Canada’s trade deficit ballooned to C$4.1 billion, much higher than the forecast of a C$1.7 billion deficit. Later in the day, Canada releases Ivey PMI, with the markets expecting the indicator to drop to 56.2 points.

There were no surprises from the Federal Reserve meeting, as policymakers maintained the benchmark interest rate at 0.25 percent. However, the tone of the policy statement was slightly hawkish message with regard to a December hike. The Fed said that the economy has improved and the employment market remains strong. The Fed also noted that inflation was moving towards its target of 2 percent. Weak inflation has long been the Achilles heel of the US economy, but this obstacle to a rate hike appears to have been removed. The policy statement hinted strongly at a December hike, noting that “the case for an increase in the federal funds rate has continued to strengthen but decided, for the time being, to wait for some further evidence of continued progress toward its objectives”.  Two FOMC members voted to raise rates immediately, Fed Presidents Esther George and Loretta Mester. With a December hike currently priced at over 70 percent, market sentiment towards the US dollar should remain positive and we could see gains against other major currencies.

USD/CAD Fundamentals

Friday (November 4)

• 8:30 Canadian Employment Change.  Estimate -10.0K. Actual 43.9K
• 8:30 . Estimate 7.0%. Actual 7.0%
• 8:30 Canadian Trade Balance. Estimate -1.7B. Actual -4.1B
• 8:30 US Average Hourly Earnings. Estimate 0.3%. Actual 0.4%
• 8:30 US Nonfarm Employment Change. Estimate 174K. Actual 161K
• 8:30 US Unemployment Rate. Estimate 4.9%. Actual 4.9%
• 8:30 US Trade Balance. Estimate -37.5B. Actual -36.4B
• 10:00 Canadian Ivey PMI. Estimate 56.2
• 16:00 US FOMC Member Stanley Fischer Speaks

*All release times are EDT

*Key events are in bold

USD/CAD for Friday, November 4, 2016

USD/CAD November 4 at 8:40 GMT

Open: 1.3392 High: 1.3428 Low: 1.3384 Close: 1.3437

USD/CAD Technical

• USD/CAD was flat in the Asian session and has posted slight gains in European trade
• 1.3371 is providing support
• 1.3457 is a weak resistance line

Further levels in both directions:

• Below: 1.3371, 1.3253, 1.3120 and 1.3028
• Above: 1.3457, 1.3551 and 1.3648
• Current range: 1.3371 to 1.3457

OANDA’s Open Positions Ratio

USD/CAD ratio is unchanged in the Friday session, consistent with the lack of movement from USD/CAD. Currently, short positions command a strong majority (69%), indicative of trader bias towards USD/CAD breaking out and moving to lower ground.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.