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It’s bumper employment data day today across the pond as we get NFP as well as the Canada employment numbers. One report could quite easily cancel the other out when trading USD/CAD but expect volatility in the event of data divergence.
On the US side, consensus is looking for 450k to 500k job gains in September, with the upside surprise in ADP bolstering dollar bulls. The shock of last month’s miss didn’t last long. The market saw through the data volatility around the Delta variant, retirees and people still not returning to work in large numbers. Is there still a lag from these workers or will they strengthen the headline print is the question.
In any event, the bar for the Fed to begin tapering would appear to be quite low. As Jay Powell said recently, he only needs to see a reasonably good report. A strong number sees the dollar break to new highs while dip buyers will be out in force on a weak print as they believe the taper will go ahead in any event.
Regarding Canada jobs, analysts expect around 85k and a fall in unemployment to 6.8% form 7.1%. Restrictions have fallen to their lowest levels since the pandemic started and people have dropped off benefits and support programs. A similar pace of increase in jobs growth as seen in the prior few months sounds reasonable. The Canadian economic outlook remains positive with markets expecting more BoC tightening by year end.
USD/CAD inching towards 200-day SMA
This pair has traded mostly sideways over the summer with only a minor upward bias following the 50-day SMA. But after spiking higher once again last month, we broke down through the ascending trendline at the start of the week around 1.2643. Prices have since been stuck between 1.2550 and 1.2650 over the past few trading sessions until yesterday when we threatened to break lower.
The 50-day SMA acts as near-term resistance at 1.2629. Bearish momentum is increasing so more selling will put pressure on support at the 200-day SMA (1.2512) and the September low at 1.2493. Expect 1.25 to be defended with the late July low at 1.2422.
