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The Canadian employment change is an important leading indicator which  can have  a significant impact on the markets. An unexpected reading in this key release can affect the direction of USD/CAD.  A reading higher than forecast is  bullish for  the loonie.

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

Published on Friday at 12:30 GMT.

Indicator Background

Job creation is one of the most important leading indicators of overall economic activity. The release of the employment change indicator simultaneously with the unemployment rate is highly anticipated and  is often a  market-mover.

After two readings in the 7.5 thousand range, the markets are expecting an improved release in August, with an estimate of 10.2K. Will the indicator meet or beat the market estimate?

Sentiment and Levels

Even if the optimism in Europe towards massive ECB bond buying fades, Canada’s fundamentals certainly support a stronger Canadian dollar: higher demand from the US that enjoyed a good jobs report, higher oil prices and an economy that continues growing. The employment releases later this week will be critical. The loonie has improved around one cent so far in August. So, the overall sentiment is bullish on USD/CAD towards this release.

Technical levels from top to bottom: 1.0030, 1.00, 0.9950, 0.99,  0.9840 and 0.9725.

5 Scenarios

  1. Within expectations: 6.0K to 14.0K: In this scenario, USD/CAD could show some slight fluctuation, but it is likely to remain within range,  without breaking any levels.
  2. Above expectations: 14.1K to 18.0K: A reading above expectations would be an indicate stronger growth in the Canadian economy,  and could  push the pair  below one  support level.
  3. Well above expectations: Above 18.0K: A sharp rise in employment  numbers could propel the pair downwards, and two or more levels of support could be broken.
  4. Below expectations: 2.0K to 5.9K: A lower than expected reading could push USD/CAD upwards, with one resistance level at risk.
  5. Well below expectations: Below 2.0K: A poor reading will hurt confidence in the loonie, and the  pair could break two  or more resistance levels.

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