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The Canadian employment change is an important leading indicator which has a significant impact on the markets. Traders and analysts carefully scrutinize employment figures looking for any sign of a market trend,  and 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 12:00 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 usually a market-mover.

The employment change indicator is quite volatile, making accurate market forecasts a tricky business. In November, the indicator stunned the markets with a reading of -54.0K, after a rosy prediction of 16.3K. Last month, the forecast of 18.0K was well off, as the actual figures were -18.3K. The forecast for the January reading is 17.8K. Will the indicator reverse the downward trend and climb into positive territory? If  the markets are off  again in their prediction, the loonie could be the loser.

Sentiment and Levels

The Canadian  dollar gained some strength in the last week of 2011, and the  upwards swing could continue.  Tension in the Middle East has boosted the price of  oil, which benefits the Canadian currency. As well, an improving economy in the US means an increased demand  for Canadian  goods and resources, which will push the loonie upwards.  So, the overall sentiment is bearish on USD/CAD towards this release.

Technical levels from top to bottom: 1.0360, 1.03, 1.0263, 1.02, 1.0143, 1.0050, 1.00  and 0.99.

5 Scenarios

  1. Within expectations:  11.0K to 23.0K: 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: 23.1K to 29.0K: A reading above expectations would be an indication  of growth in the Canadian economy,  and could  push the pair  below one  support level.
  3. Well above expectations: Above 29.0K: A sharp rise in employment  numbers could propel the pair downwards, and two levels of support  or more can be broken.
  4. Below expectations: 4.9K to 10.9K: A lower than expected reading could push USD/CAD upwards, with one resistance level at risk.
  5. Well below expectations: Below 4.9K: Another poor reading, especially one in negative territory,  will hurt confidence in the loonie, and the  pair could break two  resistance levels.

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

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