TheNews

- Canada Employment to Contract for Third Time in Last Six-Months.
- Jobless Rate to Pick-Up From Lowest Level Since 2008.

Trading the News: Canada Net Change in Employment

A 5.0K contraction in Canada Employment paired with an uptick in the jobless may drag on the loonie and produce fresh 2015-highs in USD/CAD as it fuels speculation for a further reduction in the Bank of Canada’s (BoC) benchmark interest rate.

What’s Expected:




Why Is This Event Important:

Even though BoC Governor Stephen Poloz endorses a wait-and-see approach, a dismal labor report may encourage the central bank to adopt a more dovish tone at the April 15 policy meeting in order to encourage a stronger recovery.

Expectations: Bearish Argument/Scenario

Release	Expected	Actual
Housing Starts (FEB)	179.0K	156.3K
Building Permits (MoM) (JAN)	-4.0%	-12.9%
Retail Sales (MoM) (DEC)	-0.8%	-2.3%

The slowdown in private sector consumption paired with the ongoing weakness in the housing market may drag on employment, and a marked contraction in job growth may heighten the bearish sentiment surrounding the Canadian dollar as the BoC remains cautious on the economy.

Risk: Bullish Argument/Scenario

Release	Expected	Actual
Raw Materials Price Index (MoM) (JAN)	-6.3%	-7.7%
Quarterly Gross Domestic Product (Annualized) (4Q)	2.0%	2.4%
Gross Domestic Product (MoM) (DEC)	0.2%	0.3%

Nevertheless, lower input costs accompanied by the pickup in private sector activity may encourage Canadian firms to boost their labor force, and a positive development may keep the USD/CAD range intact as the BoC looks to retain its current policy over the near-term.

How To Trade This Event Risk

Bearish CAD Trade: Canada Sheds 5.0K Jobs or Greater

• Need green, five-minute candle following the report for a potential long USD/CAD trade
• If market reaction favors a bearish loonie trade, buy USD/CAD with two separate position
• Set stop at the near-by swing low/reasonable distance from entry; look for at least 1:1 risk-to-reward
• Move stop to breakeven on remaining position once initial target is met, set reasonable limit

Bullish CAD Trade: Employment Report Exceeds Market Expectations

• Need red, five-minute candle to consider a short USD/CAD position
• Carry out the same setup as the bearish Canadian dollar trade, just in the opposite direction

Potential Price Targets For The Release
USD/CAD Daily Chart

• Favor the approach to ‘buy-dips’ in USD/CAD following the bullish RSI break, but seems as though the dollar-loonie needs a fundamental catalyst for a break/close above the February high (1.2797)
• Interim Resistance: 1.2797 (Feb. high) to 1.2800 (38.2% expansion)
• Interim Support: 1.2390 (161.8% expansion) to 1.2420 (161.8% expansion)

Impact that Canada Employment Change has had on CAD during the last release

Period	Data Released	Estimate	Actual	Pips Change (1 Hour post event )	Pips Change (End of Day post event)
JAN 2015	02/06/2015 13:30 GMT	5.0K	35.4K	+12	+8

The Canadian economy added 35.4K jobs in the first month of 2015 after contracting a revised 11.3K the month prior. At the same time, the jobless rate fell to an annualized 6.6% from 6.7% the month prior even as the participant rate held steady at 65.7%. Despite the better-than-expected headline print, the pickup in job growth was larger contributed to a 47.2K rise in part-time positions as full-time employment slipped 11.9K in January. Despite the better-than-expected print, the U.S. Non-Farm Payrolls report drove USD/CAD above the 1.2450 region to end the day at 1.2504.

--- Written by David Song, Currency Analyst and Shuyang Ren


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