DailyFX.com -
- Canada Employment to Increase for Fifth Month in 2014.
- Jobless Rate to Hold at Annualized 7.0% for Third Consecutive Month.
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Trading the News: Canada Net Change in Employment
The USD/CAD may face a larger pullback going into the end of the week should Canada’s Employment report show a meaningful rebound in job growth and fuel interest rate expectations.
What’s Expected:
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Why Is This Event Important:
An upbeat employment print may put increased pressure on the Bank of Canada (BoC) to further normalize monetary policy, but we would need to see a material shift in the forward-guidance to adopt a bullish outlook for the Canadian dollar as Governor Stephen Poloz continues to endorse a period of interest rate stability.
Expectations: Bullish Argument/Scenario
| Release | Expected | Actual |
| Ivey Purchasing Manager Index s.a. (SEP) | 52.5 | 58.6 |
| Raw Material Price Index (MoM) (AUG) | -1.5% | -2.2% |
| Gross Domestic Product (Annualized) (2Q) | 2.7% | 3.1% |
Easing input costs along with the pickup in private sector activity may generate a strong pickup in job growth, and a positive print may threaten the opening monthly range in the USD/CAD as it boosts interest rate expectations.
Risk: Bearish Argument/Scenario
| Release | Expected | Actual |
| International Merchandise Trade (AUG) | 1.60B | -0.61B |
| Retail Sales (MoM) (JUL) | 0.5% | -0.1% |
| Wholesale Trade Sales (MoM) (JUL) | 0.8% | -0.3% |
However, weakening demand at home and abroad may drag on employment, and a dismal development may heighten the bullish sentiment surrounding the USD/CAD as it gives the BoC greater scope to retain its current policy for an extended period of time.
How To Trade This Event Risk(Video)
Bullish CAD Trade: Canada Adds 20.0K or More Jobs
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Need red, five-minute candle following the report for a potential short USD/CAD trade
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If market reaction favors a long loonie trade, sell USD/CAD with two separate position
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Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward
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Move stop to breakeven on remaining position once initial target is met, set reasonable limit
Bearish CAD Trade: Employment Report Disappoints
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Need green, five-minute candle to consider a long USD/CAD position
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Carry out the same setup as the bullish Canadian dollar trade, just in the opposite direction
Read More:
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