USD/CAD: Trading the Canadian Sep 2011

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The Canadian employment change is an important leading indicator which tends to have a significant impact on the markets. Traders always take a close look at employment figures, and the employment change numbers could affect USD/CAD.

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. Canada’s unemployment rate stands at 7.2%, with virtually no change expected in the September release. Although considerably lower than the unemployment rate in the US, it is nonetheless high and continues to impede economic growth.

The employment change index dropped sharply from +28.4K in July to an anemic +7.1K in August, well below the forecast of +17.7. The forecast for September is a gain of +23.4K. If the actual figure falls below the September forecast, traders may get nervous about the Canadian dollar and the result could be a downward spin for the loonie.

Sentiment and Levels

There have been some signs of growth in the Canadian economy, such as in purchasing activity. However, the US is Canada’s largest trading partner, and as analysts are fond of saying, when the US sneezes, Canada catches a cold. Thus, a sluggish US economy always takes a toll on its northern neighbor.  Also, falling commodity prices, particularly oil, have hurt exports and may well push the Canadian dollar downwards. So, the overall sentiment is bullish on USD/CAD towards this release.

Technical levels from top to bottom: 1.0060, 1, 0.9913, 0.9850, 0.98, 0.9750, 0.9667 and 0.96.

5 Scenarios

  1. Within expectations: +18K to +29K: 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: +30K to +38K: 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 +38K: A sharp rise in employment numbers could propel the pair downwards, and two levels of support can be broken.
  4. Below expectations: +7K to +17K: A lower than expected reading could push USD/CAD upwards, with one resistance level at risk.
  5. Well below expectations: Below +7K: Another poor performance 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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About Author

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.

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