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We can take a look at USDCAD before the release of the NFP on it’s employment changes.

An analysis from Tim, Investica at Forex Factory

Following the surprise interest rate cut this week, markets will now look to assess the extent of a slowdown in the Canadian economy and the prospect for a further short-term policy response from the Bank of Canada.

The employment data is a flawed indicator to some extent as it is a backward-looking indicator, but it will still have an important impact on market sentiment.

The past two monthly releases have both been substantially stronger than expected with employment growth of 63,000 in October following an increase of 51,100 the previous month while unemployment fell to 5.8% from 5.9%.

It is unlikely that Canada will sustain this pace of job creation as a ‘normal’ increase is in the region of 25,000. There is, therefore, a strong probability of weaker data this month and a drop in employment is certainly a serious possibility.

Within the data, the full-time/part-time split will also be watched closely with employment gains treated more seriously if the increase in concentrated in full-time jobs. There are also likely to be big regional differences in the data.

Overall, following the two months of strong data, a significantly weaker figure is likely in this month’s data. In this context, any employment increase above 20,000 should be considered as strong and should trigger Canadian dollar gains.

In contrast, any fall in employment will trigger a negative reaction and a drop of over 15,000 would be likely to trigger sharp Canadian dollar losses back towards 1.02 against the US dollar while any drop over 30,000 would trigger speculation over a further interest rate cut in January.

Technical chart time

It looks easier for USDCAD to break the trendline on the top rather than retracing down, but point to take note is that this pair is still on the major downcourse. Of course this news would probably be superceded by Nonfarm Payroll coming up in an hour and a half right after this.

Dan advice: Place your long for USDCAD unless 1.0057 breaks

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