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Loonie Poised to Gain Ground on Strong Employment Report

David Becker
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Loonie Poised to Gain Ground on Strong Employment Report

USD/CAD is trading on the defensive, edging further below yesterdays and Wednesday’s lows in testing 1.0630 ahead of Friday’s employment report. Today’s Canadian employment report is expected to be on the firm side, which would further diminish the disinflation focus at the Bank of Canada, though this week’s Business Outlook Survey provides cover for the retention of the dovish focus on downside inflation risks when the central bank decides on policy next week.

Non-farm payrolls are expected to expand 30.0k in June after the 25.8k rise in May. This report has been extremely volatile from month to month and there is no reason to believe Friday’s report will be any different. Hence, there is downside risk to June projections given that a realization of the anticipated gain would mark the first back-to-back monthly gains since October and November of last year. The unemployment rate is expected to hold steady at 7.0% in June. Hours worked are expected to improve 0.5% month over month in June after the 1.1% bounce that was only a partial rebound from the 1.9% month over month drop in April. Average hourly earnings are seen accelerating to a still lean 1.6% year over year growth rate in June from the 1.4% clip in May that was the slowest since October of 2011’s 1.1% clip.

The USDCAD is testing recent lows and the next level of target support is the December lows at 1.0580. Resistance is the 10-day moving average near 1.0655. Momentum is flat with the MACD (moving average convergence divergence) index printing very close to the zero index level with no real trajectory. The RSI (relative strength index) is also reflecting consolidation although the 31 print is just above the oversold trigger level of 30.

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