The Canadian Dollar pairs (USDCAD and EURCAD) are expected to be in focus as the Canadian Employment data will be released at 12.30pm GMT. The report is two-pronged: the Canadian Employment Change and the Unemployment Rate.
The consensus for the employment change is +11.2K jobs to be added to the Canadian economy, while the consensus figure for the unemployment rate is 5.7%, same as for the last month. The employment change is therefore expected to have made a significant drop from 81.1K job additions recorded the previous month. Any revisions will also have to be taken into consideration.
Download our Gold Prices Q4 Outlook Today!
Outlook for the Canadian Dollar
The deviation will serve as the basis for considering whether to trade any of the CAD pairs on the news or not. For the employment change, the deviation figure to work with will be 69.9K. Therefore, if the Canadian Employment change comes in at +81.1K or higher, in the presence of an unemployment figure of 5.7% or lower, this is considered good for the Canadian Dollar. A drop in the actual employment change below -58.7K jobs or lower, in the presence of an unemployment figure of 5.7% or higher, will be bad for the Canadian Dollar.
This means that there must be no conflict. There needs to be an inverse relationship in the numbers with the right deviation to produce the kind of response that could be considered tradable. Anything short of this will make it difficult to profit from the situation.
This month’s news numbers are also going to be complicated by fundamentals from other ends. First, we have the US Dollar which is being moved about chiefly by the headlines from the US-China trade talks in Washington. Across the Atlantic, we have the Brexit headlines in which the British Pound and the Euro have been engulfed all week long. The Yen is also involved with the trade talks, being tossed about by “on again, off again” risk sentiment.
It may be best to scan the various CAD pairs (USDCAD, EURCAD, GBPCAD and CADJPY) to know which one aligns best with any trade objectives. If the news is bad for the CAD, trade the pair in which the paired currency is bullish on the day. If the news is good for the CAD, do the reverse.
USDCAD Possible Setup
The 4-hour chart of the USDCAD shows an ascending support trendline which connects the lows of price action from September 10 till date. This line intersects the S1 pivot on the day, strengthening that region as an intraday support.
Heading into the news, this area (1.3257) should be the support area to watch. If the news is CAD-positive and the USD does not get any push from the trade talks, we would look for a break of the trendline with the initial target set at 1.3224 (Aug 14 and Aug 27 lows).
On the flip side, a report that is CAD-negative could send the USDCAD bouncing from the 1.3257 support, targeting the 1.3334 multi-day resistance levels of July and August 2019. This is also where today’s R1 resistance pivot lies.