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USD/CAD capped below 1.09 on disappointing jobs data

H.S. Borji
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The North American pair was trading below 1.09 on Friday, as disappointing jobs data halted the US dollar’s advance, while Canada’s jobs report also came in below forecasts.

The USDCAD was virtually unchanged at 1.0878, easing off an intraday high of 1.0904. The pair is likely to find support at 1.0826. Initial resistance is ascending from 1.0918.

The US dollar was contained across the board as investors reacted to the August nonfarm payrolls report. The US dollar index dipped 0.21 percent to 83.64.

The euro halted its slide against the greenback, as the EURUSD advanced 0.2 percent to 1.2970. The pair, which tumbled 1.4 percent on Thursday, faces initial support at 1.2858 and resistance at 1.3093.

The US dollar declined against the Japanese yen, as the USDJPY fell back below the 1.05 handle. The pair tumbled 0.34 percent to 104.94. The USDJPY faces initial support at 104.89 and resistance at 105.51.

In economic data, US employers added fewer workers in August, as overall job creation fell to its lowest level in eight months.

Nonfarm payrolls increased just 142,000 in August, following an upwardly revised gain of 212,000 the previous month, the Labor Department reported today in Washington. Economists forecast a gain of around 230,000.

The unemployment rate fell back to 6.1 percent from 6.2 percent, as expected. The participation rate dipped slightly to 62.8 percent from 62.9 percent, official data showed.

Average hourly earnings rose 0.2 percent in August, which translated into an annualized gain of 2.1 percent.

The US labour market was adding jobs at a torrid pace in the six months through July. August marked the first time since January job gains were less than 200,000.
Despite the unexpected slowdown, today’s figures are unlikely to detract from the view the US labour market was improving at a rapid pace. Today’s report is also unlikely to ease speculation the Federal Reserve could begin lifting interest rates sooner than previously assumed.

Expectations of an early rate hike have helped propel the US dollar in recent months. The US dollar index has advanced nearly 5 percent since the beginning of July.

North of the border Statistics Canada published disappointing employment figures on Friday. Overall employment in Canada declined 11,000 in August. Economists forecast an increase of 10,000.

Canada’s unemployment rate was unchanged at 7 percent, as labour force participation declined slightly to 66 percent from 66.1 percent.

Year-on-year, employment growth in Canada has been negligible. Weak employment growth and an overall shaky economy have kept demand for the Canadian dollar at a minimum for much of the year, despite several data-inspired rallies.

The USDCAD has advanced 2.2 percent in 2014 and foreign exchange analysts expect to see bigger gains before the closing of the year. The Bank of Canada is relying on a weaker currency to drive the country’s export sector, which improved considerably in the second quarter.

On Thursday Canada posted its biggest trade surplus since 2008, as exports rose 1.4 percent in July to a new record high of $45.5 billion. The gains were led by a ten percent advance in automobile and parts sales. The country’s trade surplus rose reached $2.6 billion, up from $1.8 billion in June.

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