Canada Employment Report: Implications for the USDCAD

The Canada Employment report, which consists of the employment change and the unemployment rate, is due for release tomorrow at 12.30pm GMT. The projections are for employment change to come in at -500K (versus the previous figure of -1993.8K) with an unemployment rate of 15.0% (the previous number came in at 13.0%). The report is coming on the back of a stellar week for the Canadian Dollar, boosted by USD weakness and rising oil prices. However, the OPEC + meeting that was supposed to discuss an extension of the output cuts is now shrouded in uncertainty. Allegations of quota cheating have forced the Saudis and Russians to ask for a postponement of the meeting to investigate these claims. This development has stalled the advance of crude oil prices as well as the advance of the Canadian Dollar on several currency pairs. 

Tomorrow’s jobs report coincides with that of the US. Therefore, an opportunity could arise to trade the USDCAD if there is a divergence in the jobs numbers of both neighbours. 

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Outlook for the USDCAD

Last time out, the extent of the employment change and the change in the unemployment rates of both countries favoured the Canadian Dollar over the US Dollar. This time around, the projections are for a 75% improvement in Canadian Employment Change, along with a 15% increase in unemployment rate. For the US, the expectation is for a 61% improvement in employment change as well as a 32% increase in unemployment rate. Clearly, the projections favour the CAD. 

If both reports meet expectations, it would not be out of place to expect the CAD to attract bids over the USD. 

Only a significant miss to the downside, which manifests as an increase in unemployment rate above 18% as well as an employment change of -1000K, would weigh on the Canadian Dollar. We would need to see figures on the US side that are closer to the projected figures at the same time or far better than expected, for a possible buy opportunity to arise on the USDCAD. This then presents an opportunity for the USDCAD to attempt a break above 1.35499, with a chance to approach 1.36961 and 1.37629 up for grabs.

A substantial improvement which beats expectations on the Canadian side, accompanied by an employment change or unemployment rate on the US side which meets expectations or is worse than expected, tilts the scales in favour of the Loonie and could present another opportunity for a decline on the USDCAD. This scenario could allow the UADCAD close the price gap of March 9, break below the 200-day moving average and aim for the downside targets at 1.34656, 1.33821 or possibly 1.33487.

It is also important to consider the role of crude oil headlines on the value of the Loonie. Headlines surrounding the OPEC+ meeting may have an impact on crude oil prices and the Loonie as well. Watch out for any possible interferences in this regard. 

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