USD/CAD: Trading the Canadian Nov 2011

The Canadian Employment Change is an important leading indicator which tends to be a market-mover. Analysts and traders closely examine this indicator  together with  the Unemployment Rate reading, which are released at the same time  and provided critical employment data. A reading that is higher than the market forecast is bullish for the Canadian dollar.

Here are the details and 5 possible outcomes for USD/CAD.

Published on Friday at 11:00 GMT.

Indicator Background

Job creation is one of the most important leading indicators of overall economic activity. The Employment Change indicator is used to consumer spending behavior, as higher employment figures translates into increased consumer spending.

The employment change index stunned markets in October, with a reading of 60.9K after a forecast of only 15.2K. This sharp rise helped to boost the loonie against the US dollar. The forecast for November is for a more moderate increase of 20.3K.

Sentiment and Levels

There have been some signs of growth in the Canadian economy, such as an upward trend in GDP over the last two readings. In the US, the Federal Reserve came out this week with a bleaker view of the US economy, forecasting lower growth and higher unemployment than it had estimated in June. So, the overall sentiment is bearish on USD/CAD towards this release.

Technical levels from top to bottom: 1.05, 1.0360, 1.0263, 1.02, 1.0080, .9915 and .9830.

5 Scenarios

Within expectations: 14K to 26K: In this scenario, USD/CAD could show some slight movement, but it is likely to remain within range, not breaking any levels.

1. Above expectations: 27K to 32K: A reading above expectations would signal continued employment growth and could send the pair below one support level.
2. Well above expectations: Above 32K: Another sharp rise in employment figures could trigger a rally around the loonie, and two levels of support can be broken.
3. Below expectations: 7K to 13K: A reading lower than expected could push the pair upwards, with one resistance level at risk.
4. Well below expectations: Below 7K: This scenario is unlikely, given the stable Canadian economy. In this scenario, USD/CAD would drop and could break two resistance levels.

For more on USD/CAD, see the Canadian dollar forecast.