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Canadian Employment report in focus

Market Analysis


Canada employment will be released today at 13:30 GMT and expected to rise 20.0k in January after the 64.8k gain in December. Employment has posted monthly gains since July of 2016. But wage growth remains at a pace that suggest slack still remains in the labour market, although there has been some marked improvement in wage growth recently. We expect average weekly earnings to grow at a 3.6% y/y rate in January from the 2.7% y/y pace in December. Earnings are seen rising 0.8% m/m after the 0.2% gain in December, driven by the 20.7% minimum wage increase in Ontario. While the 3.6% y/y rate would be the quickest pace in five years, the BoC should look through it given the minimum wage increase. Unemployment is seen at 5.8%, matching December.

The loonie continued to cede ground to the dollar, by pivoting around 1.2600 today and above the Daily PP level at  1.2586 for 13 consecutive hourly sessions. The pair is seen forming a sharp rally since Ferbuary 2,  reaching the 1.2615 high today from the 1.2255 low seen last Friday. It broke the 50 DAY MA and closed above that yesterday, while today it is seen extending further up its Daily upper Bollinger Bands patterns.

Meanwhile, the positive momentum is endorsed in short-term as well, with loonie strongly supported by 50-period EMA, along with the fact that it is traded between PP level and R1 at 1.2627, so far today. Short-term momentum indicators are indicating further upside momentum, with Stochastic indicator sloping above neutral since Wednesday crossing, while MACD oscillator remains positive since the start of this northwards rally.

Therefore the technical view supports the positive momentum of the pair, despite the indecision noticed on the anticipation of the Labour data today, by the last doJi hourly candle and the consolidation mode seen since last night. This could be considered as a sign that bulls losing the major control of the pair. However, the Labour report today, would be the driven of the market and will help us identifying loonie’s  direction. Hence the focus is on the data.

If the Data come out stronger than expected then USDCAD is likely to drifted lower and test the 50-period EMA and the Daily S1 at, 1.2570-1.2560 area. On the other hand, if the data come out weaker than expected, then we might see pair being boosted above the R1 at 1.2630 and closer to R2 at 1.2655.

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Andria Pichidi

Market Analyst


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