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The USD/CAD Could Turn on a Robust Jobs Report

David Becker
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The USD/CAD Could Turn on a Robust Jobs Report

The USDCAD has been trading in a uptrend since turning in mid-July as investors perceive the chances of a change in policy is more likely to come from the U.S. than its neighbour to the north. This comes despite some better than expected Canadian data, which could be confirmed this Friday with the Canadian jobs report.

Canada’s employment is expected to expand 15.0k in September after the 11.0k drop in August. The longer-term growth outlook continues to firm, which is consistent with the view for increased hiring in Canada. Of course, this report fluctuates month to month, which has made it difficult to pin down the actual growth in the economy. A hefty revision in July corrected a human error. The August report put a record 111.8k private payroll plunge in the mix. The outlook for the monthly payroll change remains subject to considerable uncertainty, as do the first-reported results.

The August report was broadsided by a 111.8k drop in private sector jobs that was the largest one-month drop on record. Self-employment rose a record 86.9k in August, leaving a 24.9k drop in the total private jobs aggregate. The dichotomy between the record 111.8k drop in the private sector category and the all-time high rise in the self-employed category does raise the risk that something was amiss with the survey.

An as-expected gain in September would underpin projections for a rebound in second half growth that will outpace the Bank of Canada’s projections, threatening the Bank’s neutral bias. But given the eroding confidence in this report, a positive jobs print may provide a less pronounced boost to the growth outlook than has typically been the case.

Despite the recent uptrend, momentum seems to be turning as the MACD (moving average convergence divergence) index generated a sell signal. This occurs as the spread (the 12-day moving average minus the 26-day moving average) crosses below the 9-day moving average of the spread.

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