USD/CAD – Canadian dollar shrugs as ADP nonfarm payrolls sparkles

The Canadian dollar is trading sideways in the Wednesday session. In the North American session, USD/CAD is trading at 1.2835, up 0.09% on the day. On the release front, there are no Canadian events for a second straight day. In the U.S, ADP nonfarm payrolls jumped 230 thousand, crushing the estimate of 185 thousand. This marked the strongest increase in private sector jobs since March. We’ll also get a look at ISM Non-Manufacturing PMI, which is forecast to drop to 58.0 points. On Thursday, the U.S releases unemployment claims.

After months of intense negotiations, Canadian and U.S officials have finally hammered out a trade agreement on Monday, which paves the way for a new trade agreement between Canada, Mexico and the United States. The NAFTA agreement, which was a pillar of the Canadian economy for 24 years, gives way to the USMCA – the U.S-Mexico-Canada Agreement. Canada and the U.S both offered concessions in order to reach a deal. Canada’s auto sector, which is highly dependent on cross-border movement, will be shielded from U.S tariffs. In return, U.S farmers will be granted increased access to Canada’s dairy market, which has been highly protected. The new agreement is expected to be signed in November and must then be ratified by the legislature of all three countries. This means that the provisions of the USMCA are not expected to go into effect before 2020. The agreement boosted the Canadian dollar, which has shown strong gains of late – the currency has jumped 2.4% since mid-September.

Traders are keeping a close eye on Friday, when the focus will be on employment releases on both sides of the border. The U.S will release wage growth and official nonfarm payrolls, both of which are expected to weaken in September. However, the markets are expecting Canadian employment change to rebound with a strong gain of 25.0 thousand. If the reading is within expectations, the Canadian dollar could move upwards.

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ADP employment increased by 230,000 in September

USD/CAD Fundamentals

Wednesday (October 3)

• 8:15 ADP Nonfarm Employment Change. Estimate 185K. Actual 230K
• 9:45 US Final Services PMI. Estimate 52.9
• 10:00 US ISM Nonfarm Manufacturing PMI. Estimate 58.0
• 10:30 US Crude Oil Inventories. Estimate 1.1M
• 14:00 US FOMC Member Lael Brainard Speaks
• 14:15 US FOMC Member Loretta Mester Speaks
• 16:00 US Fed Chair Powell Speaks

Thursday (October 4)

• 8:30 US Unemployment Claims. Estimate 214K

*All release times are DST

*Key events are in bold

USD/CAD for Wednesday, October 3, 2018

USD/CAD, October 3 at 8:00 DST

Open: 1.2824 High: 1.2842 Low: 1.2807 Close: 1.2835

USD/CAD Technical

USD/CAD was flat for most of the Asian session and has posted small gains in European trade

• 1.2831 is providing weak support
• 1.2970 is the next resistance line
• Current range: 1.2831 to 1.2970

Further levels in both directions:

• Below: 1.2831, 1.2733 and 1.2649
• Above: 1.2970, 1.3067, 1.3198 and 1.3292

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