The Canadian employment change is an important leading indicator which often a significant impact on the markets, and can affect the direction of USD/CAD. A reading which is higher than forecast is bearish for the US dollar.
Here are the details and 5 possible outcomes for USD/CAD.
Published on Friday at 12:30 GMT.
Indicator Background
Job creation is one of the most important leading indicators of overall economic activity and a key component of economic growth. The release of the employment change indicator simultaneously with the unemployment rate is highly anticipated by the markets.
Employment Change sparkled in April, as the indicator shot up to its highest level in almost two years. The reading of 83.3K easily surpassed the market estimate of 11.3K. The markets are predicting that this sharp jump was a one-time blip, as the forecast is for a modest increase of 12.9K. Will the indicator again surprise the markets in May?
Sentiment and Levels
The drop in oil prices is weighing on the loonie, which has weakened slightly against its US counterpart. However, there are signs of increased economic activity, such as the strong Housing Starts reading earlier this week. As well, a still growing US economy is beneficial for the pair. So, the overall sentiment is bearish on USD/CAD towards this release.
Technical levels from top to bottom: 1.02, 1.0143, 1.0050, 1.0030, 1.00, 0.99, and 0.98.
5 Scenarios
- Within expectations: 9.0.0K to 17.0K: In this scenario, USD/CAD could show some slight fluctuation, but it is likely to remain within range, without breaking any levels.
- Above expectations: 17.1K to 21.0K: A reading above expectations would be an indication of growth in the Canadian economy, and could push the pair below one support level.
- Well above expectations: Above 21.0K: A sharp rise in employment numbers could propel the pair downwards, and two or more levels of support could be broken.
- Below expectations: 5.0K to 8.9K: A lower than expected reading could push USD/CAD upwards, with one resistance level at risk.
- Well below expectations: Below 5.0K: A poor reading will hurt confidence in the loonie, and the pair could break two or more resistance levels.
For more on USD/CAD, see the USD/CAD.