Trading the News: Canada Net Change in Employment
The Canadian economy is expected to add 10.0K jobs in July and a strong rebound in employment should prop up the loonie as it raises the outlook for growth.
What’s Expected:
Time of release: 08/09/2013 12:30 GMT, 8:30 EDT
Primary Pair Impact: USDCAD
Expected: 10.0K
Previous: -0.4K
DailyFX Forecast: -5.0K to 15.0K
Why Is This Event Important:
Although the Bank of Canada (BoC) softened its tone for a rate hike, a marked improvement in the labor market may encourage Governor Stephen Poloz to adopt a more hawkish tone for monetary policy, and a shift in central bank rhetoric may heighten the appeal of the Canadian dollar as market participants weigh the outlook for monetary policy.
The Upside/Bullish Scenario
| Release | Expected | Actual |
| International Merchandise Trade (JUN) | -0.51B | -0.47B |
| Retail Sales (MoM) (MAY) | 0.4% | 1.9% |
| Wholesale Sales (MoM) (MAY) | 0.3% | 2.3% |
The pickup in private sector consumption may prompt businesses to expand their labor force, and a pickup in job growth may spark a bullish reaction in the Canadian dollar should the data fuel speculation for higher borrowing costs.
The Downside/Bearish Scenario
| Release | Expected | Actual |
| Ivey Purchasing Manager Index s.a. (JUL) | 57.0 | 48.4 |
| Gross Domestic Product (MoM) (MAY) | 0.3% | 0.2% |
| Business Outlook Future Sales (2Q) | 30.00 | 9.00 |
On the other hand, the sharp slowdown in business spending may point to a further contraction in employment, and a dismal print may spur a near-term rally in the USDCAD as it raises the scope of seeing the BoC carry its wait-and-see approach into the following year.
Forecasts for a rebound in employment favors a bullish outlook for the loonie, and a marked pickup in job growth may set the stage for a long Canadian dollar trade as it fuels bets for higher borrowing costs. Therefore, if the economy adds 10.0K jobs or more in July, we will need to see a red, five-minute candle following the report to consider a sell entry on two-lots of USDCAD. Should these conditions warrant a short trade, we will set the initial stop at the nearby swing high or a reasonable distance from the entry, and this risk will establish our first objective. The second target will be based on discretion, and we will move the stop on the second lot to cost once the first trade hits its mark in order to preserve our profits.
In contrast, the ongoing weakness in the real economy along with the contraction in business spending may drag on hiring, and a dismal print may weaken the loonie as it dampens the scope for a rate hike. As a result, if the print falls short of market forecast, we will implement the same strategy for a long dollar-loonie trade as the short position laid out above, just in the opposite direction.