We’ll be getting the Canadian Employment Change release number tomorrow, here is the forecast:
7:00am (NY TIme) CA Employment Change Forecast 30K Previous -9.3K
(Unemployment Rate 8.0%)
ACTION: USDCAD BUY -1K SELL 55K
The Trade Plan
Canadian Employment Change report will be release at 7:00am sharp today, and it’s the only high impact tradable news releases today. What I am looking for is a minimum deviation of around 30K, or the difference between the Forecast number (30K) versus the actual release number; therefore if we get a positive 55K of release, we should see demand for the CAD rise, therefore we should SELL USD/CAD; however, if we get a negative number, such as -1K or worse, we should see some weakness in the CAD, and that will be my cue to BUY USD/CAD pair.
I’ll also pay close attention to the unemployment rate, which stands at 8.0%, from last month’s release. As long as this number does not conflict with the Employment Changes, we should follow the direction of the news release. If we get a conflict, such as better Employment Changes but higher Unemployment Rate, then we’ll need to look at the context of the market before take the trade.
The Market
USDCAD has been on a downward trend since the decline from 1.0680 level. BOC recently hiked interest rate as expected, which added more bullish sentiment to the loonie. It’s likely that CAD will strengthen against USD to the 1.0250 or more before finding support for the pair.
If we get a 55K or better release, CAD will strengthen across the board and we could see 1.0200 to 1.0150 being tested tomorrow. However, if we get an inline with expectation release, market could react in a typical “buy on rumor, sell on news” and weaken after the release.
Additional Thoughts
As stated before, USD/CAD is a slow moving currency pair, it will move on a strong deviation, but retracement is usually non-existent or very small… Therefore, if we get a strong release, especially when it is going with the pre-market trend, a sooner than later entry should add more pips to your account. Expect to see a spike down –> stall —> another spike down…
Pre-news Considerations
USD/CAD should strengthen before the release as IVEY PMI showed a blockbuster number that increased speculation for a much better than expected Employment Change. Therefore I’d be looking to SELL USDCAD at resistance areas.
DEFINITION
“Measures the change in number of employed people during the previous month. A rising trend has a positive effect on the nation’s currency. Job creation is an important indicator of economic health because consumer spending, which is highly correlated with labor conditions, makes up a large portion of GDP. This report is the first of the month that relates to labor conditions, making it susceptible to big surprises.”
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{ 2 comments… read them below or add one }
Unfortunately, we have conflict result and not very positive employment change, see you next week, Henry!
Another excellent analysis. Thank you Henry, much appreciated.