Canadian dollar extends gains after jobs report

• Canadian dollar continues to gain ground
• US, Canada post strong employment reports

The Canadian dollar continues to show momentum after a strong jobs report on Friday. In the North American session, USD/CAD is trading at 1.3618, down 0.32%.

Last week ended with better-than-expected job growth in both Canada and the US. Canada’s economy created 63,800 jobs in September, up from 39,900 a month earlier and blowing past the forecast of 20,000. This marked an eight-month high. The unemployment rate remained at 5.5%, just below the estimate of 5.6%. Wage growth ticked higher to 5.3%, up from 5.2% but shy of the estimate of 5.5%.

US nonfarm payrolls soared, with an increase of 336,000 in September. This follows an upwardly revised gain of 227,000 in August and crushed the forecast of 170,000. Wage growth remained at 0.2% m/m, below the forecast of 0.3 m/m, and the unemployment rate was unchanged at 3.8%, compared to the forecast of 3.7%.

The strong employment numbers could put pressure on both the Federal Reserve and the Bank of Canada ahead of their next rate moves. The surprisingly strong numbers on both sides of the border could complicate the efforts of the Fed and the BoC in their battle to continue to lower inflation. Both central banks paused at the last meeting and would like to prolong holding rates and eventually begin trimming rates.

For the Bank of Canada, wage growth and strong job creation remain concerns. Wages have increased for three straight months, despite signs that the economy is cooling down, and the September job numbers pointed to a resilient labour market. Will the growth in employment and wages force the BoC to raise rates at the meeting on October 25th? The answer isn’t clear, but next week’s inflation report could be the key factor in the BoC’s next rate decision.

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USD/CAD Technical

• USD/CAD faces resistance at 1.3670 and 1.3722
• 1.3554 and 1.3446 are the next support lines

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