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The Canadian job market gained only 7,100 jobs in July, weaker than a gain of almost 18K that was expected, and lower than last month’s gain. But on the other hand, the unemployment surprised with a drop to 7.2%, lower than 7.4%, that was predicted. The Canadian dollar is now retreating from resistance.

The significant slowdown in the US didn’t skip Canada. The huge economic ties between these neighbors mean that Canada is dependent on the US, for good and for bad, and this is reflected in a small gain in jobs. But at least for now, the loonie prefers to see the full half of the glass.

Update: USD/CAD is creeping back up.

USD/CAD is at 0.9813, down from 0.9835 before the release. The moves are limited due to the confusing figures.

The Canadian dollar was hit badly this week. It began with a slow rise of USD/CAD towards the 0.9667 line. When the global stock markets collapsed after Trichet’s weak actions, the pair broke higher.

It wasn’t only the safe haven flows that went to the US dollar, but also oil prices on which Canada depends, took a dive.

USD/CAD stopped only at around 0.9835. Further resistance is at 0.9930, followed by 0.997. Support is at 0.9750.  For more on the loonie, see the Canadian dollar forecast.

The markets are tense towards the release of the US job figures, which are expected to show a gain of around 90K jobs in the world’s largest economy. Bad US figures have contributed to global fears. It’s important to note that within these bad figures, including weak PMI numbers, the employment components were still somewhat plausible.

See the NFP preview for more.