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A much weaker than expected Canadian jobs report was overshadowed by an underwhelming US Nonfarm Payrolls print that has taken out the legs underneath the dollar. Still, analysts at TD Securities think the dip in the USD is temporary and that the reluctance for the CAD – and dollar bloc – to participate in that outcome can persist for a little longer. 

Key quotes

“Job losses accelerated to 213K in January as COVID-19 lockdowns weighed heavily across Ontario and Quebec. However, part-time employment accounted for all jobs lost during the month and the pullback was concentrated in only a few industries.”

“The unemployment rate rose to 9.4% with an offsetting decline to participation, but the more surprising element of the January LFS was a 0.9% MoM increase in total hours worked which suggests a relatively muted headwind to growth.” 

“Broad USD variation should remain the main focus for USD/CAD but our view here is that the USD rally has further to run, so we would look to a dip in the dollar as an opportunity to fade.”

“We think the CAD’s reluctance to participate in a resumption of a USD bounce will likely persist for the time being, particularly as risky asset prices continue to lend support to high beta FX. But, we think it is a matter of time before this FX subset will succumb to USD pressures.”

“1.2880 will be the key resistance marker for USD/CAD, a level that should accelerate topside if broken. Support into 1.2750/80.”