USD/CAD Retreats after US NFP and CAN Jobs Data Diverge

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USD/CAD Retreats after US NFP and CAN Jobs Data Diverge

Today we got data from the US and Canada. While US NFP data slightly disappointed, Canadian jobs data surprised to the upside and the  USD/CAD fell in reaction to the divergence.

US NFP Employment Change (October): 214K
Forecast: 235K
Previous: 256K
us NFP oct 2014
(click to enlarge; source: tradingeconomics.com)
The unemployment rate slid from 5.9% from 5.8%. The average hourly earnings grew 0.1% in October, which is another month of weak-non-existent wage growth.

CAN Employment Change (October): 43.1K
Forecast: -3.9K
Previous: 74.1K
can employment change oct

(click to enlarge; tradingeconomics.com)
Employment change data has been volatile in Canada, one month up the next down. However, was saw 2 straight months of positive job growth in Sept-Oct. You can also see in the chart above that there is a general uptrend in job growth data even during the up-down volatility.  Furthermore, Canada’s unemployment rate fell to 6.5% in October. The forecast and previous reading for September was 6.8%.

Comparing the Job Data:
We can say the US data disappointed, but the general trend of strong labor market recovery is still visible and this month’s data was not that bad. The only negative was the soft wage growth data. If we don’t get a pick up in wages, the FOMC will have a hard time sticking to its mid-2015 rate hike schedule.

We can say that the Canadian jobs data surprised to the upside, and shows the labor market recovery pick up steam, while the US labor market recovery seems to have decelerated. This data should give the CAD strength against weaker currencies such as EUR, AUD, and maybe even GBP. However, with the US job market also improving and the FOMC still expected to raise rates by mid-2015, we should see any dip in USD/CAD as a chance to buy, especially because the prevailing trend in USD/CAD is bullish.

USD/CAD 4H Chart 11/7
usdcad 4h chart 11/7
(click to enlarge)

The USD/CAD rallied to a new high on the year this week at 1.1466. After stalling for a few sessions, it fell on the back of the US/CAN Jobs data. The 4H chart shows a relatively sharp decline.

However, we should note that the market is bullish, and expect buyers on this dip. The first area of support is the current 1.1350 area, which is reinforced by a very short-term rising speedline. Just below that the 1.1295-1.13 area involves the 50-period SMA, and a previous resistance pivot. This level is still above this week’s low, and thus a rally from here is in-line with the bullish continuation outlook, which the USD/CAD is carrying despite today’s job reports. Look for support here at 1.13, especially if the RSI falls and stalls aroudn 40.

Now, a break below 1.1250 might open up some short to medium term consolidation/bearish correction, especially if the 4H RSI dips to 30. In this scenario, we still need to limit the bearish outlook to the 1.1122 support pivot.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.