USD/CAD – Canadian dollar shrugs as Canadian employment jumps

The Canadian dollar is unchanged in the Friday session. In the North American session, USD/CAD is trading at 1.2934, up 0.11% on the day. On the release front, the focus is on key employment indicators on both sides of the border. Canada added 63.3 thousand jobs, crushing the estimate of 25.0 thousand. The unemployment rate remained unchanged at 5.9%. In the U.S, nonfarm payrolls dropped sharply to 124 thousand, missing the estimate of 185 thousand. Wage growth edged lower to 0.3%, matching the estimate. The unemployment rate dropped to a sizzling 3.7 percent.

The Federal Reserve remains on track to deliver a rate hike in December, after raising rates at the September meeting. Currently, the likelihood of a December rise is pegged at 80%, according to the CME Group. The Fed has reiterated that it will continue its policy of gradual rate hikes, and is expected to raise rates three more times in 2019. This has put considerable pressure on the Bank of Canada to follow suit and also raise interest rates. With the BoC holding its next policy meeting on October 25, policymakers will be carefully monitoring Friday’s employment change reading – a strong gain in new jobs would likely boost the odds of a rate hike in October and also propel the Canadian dollar higher.

Fed Chair Jerome Powell had a hawkish message for the markets on Wednesday. Powell said that interest rates were still accommodative, but were “gradually moving to a place where they will be neutral”. Powell said that extremely accommodative low interest rates were no longer needed, since the economy has strengthened. The hawkish comments helped push the U.S dollar higher on Wednesday. Analysts have noted that there is no precise definition of a neutral rate, but the Fed tends to use the 3 percent level as its yardstick. With the Fed expected to continue its gradual increase in rates, this level could be reached in 2019.

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USD/CAD Fundamentals

Friday (October 5)

• 8:30 Canadian Employment Change. Estimate 25.0K. Actual 63.3K
• 8:30 Canadian Unemployment Rate. Estimate 5.9%. Actual 5.9%
• 8:30 Canadian Trade Balance. Estimate -0.5B. Actual +0.5B
• 8:30 US Average Hourly Earnings. Estimate 0.3%. Actual 0.3%
• 8:30 US Nonfarm Employment Change 185K. Actual 134K
• 8:30 US Unemployment Rate. Estimate 3.8%. Actual 3.7%
• 8:30 US Trade Balance. Estimate -53.4B. Actual -53.2B
• 12:40 US FOMC Raphael Bostic Speaks
• 15:00 US Consumer Credit. Estimate 14.9B

*All release times are DST

*Key events are in bold

USD/CAD for Friday, October 5, 2018

USD/CAD, October 5 at 7:45 DST

Open: 1.2924 High: 1.2955 Low: 1.2889 Close: 1.2923

USD/CAD Technical

USD/CAD showed little movement in the Asian session. In European trade, the pair posted small gains but has retracted.

• 1.2831 has strengthened in support
• 1.2970 is the 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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