Canadian dollar calm ahead of US, Canada jobs report

The Canadian dollar is drifting on Friday. In the European session, USD/CAD is trading at 1.3496 at the time of writing, down 0.05%. We could see some volatility from the Canadian dollar later today, with the release of the US and Canadian job reports.

All eyes on nonfarm payrolls

The US will release the August employment report, highlighted by nonfarm payrolls. The July reading of 114 thousand was unexpectedly low and sent shock waves throughout the global financial markets. Investors panicked that the US economy was hurtling into a depression but cooler heads soon prevailed. Still, investors remain jittery and another disappointing release could sent the markets sharply lower. Nonfarm payrolls are expected to have improved in August, with a market estimate of 160 thousand.

Investors will be hoping that today’s nonfarm payrolls provide a clearer picture of the strength of the labor market. This week’s US job numbers were mixed, as unemployment claims dropped but JOLT job openings declined and were well below the market estimate. The August ADP employment report dropped to just 99 thousand, down from a revised 111 thousand in July and way off the market estimate of 145 thousand. The ADP report has generally not been a reliable indicator for nonfarm payrolls, although the correlation has been stronger this year.

The nonfarm payroll report could determine the Federal Reserve’s rate move at the Sept. 18 meeting. A strong release would likely cement a 25-basis point cut, while a weak figure would raise the likelihood of an oversize 50-bps cut, which is currently at 43% according to the CME’s FedWatch.
Canada expected to show mixed employment numbers

Overshadowed by the anticipation over the US jobs report, Canada will also release employment data today. Job growth is expected to rebound in August to 25 thousand, after a rare decline a month earlier (-2.8 thousand). Unemployment has steadily crept higher this year and is expected to nudge higher to 6.5%, up from 6.4% in July. Like the Fed, the Bank of Canada has shifted its focus to the labor market, now that the battle with inflation has been largely won.

USD/CAD Technical

• USD/CAD tested support at 1.3487 earlier. Below, there is support at 1.3448
• 1.3532 and 1.3571 are the next resistance lines

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