Summary:

• Canadian employment change: -1.1k vs 17.8k exp
• Full time roles and wages both beat forecasts however
• USDCAD rises in the initial reaction but could be set for a downtrend

On the face of it the latest employment figures from Canada are something of a disappointment, but upon closer inspection they are actually pretty solid. The headline employment change for April showed an unexpected fall of 1.1k vs 17.8k expected and a prior reading of 32.3k. This appears to be a negative reading on first glance but if other aspects of the report are taken into account it is not so bad. An important consideration is the quality of jobs added, with the number of full time roles seen as a key determinant. In this area a reading for full-time roles of 28.8k vs 16.8k exp (68.3k prior) is pleasing and indicates that all the decline can be explained by temporary work.   

 

 Permanent jobs rose once more and are not far off their highest pace of growth since 2012. Source: XTB Macrobond

Average hourly earnings is another important aspect to consider, and here there was more good news with a 3.3% increase vs 3.2% expected, a decent rise on the 3.1% prior. There has been a pretty strong uptrend in this metric in recent years and with it rising further above 2% there is some suggestion that this will drive increased inflationary pressures. It is also worth noting that the unemployment rate remained constant at 5.8%. 

 Canadian wages have continued to improve with the increase seen not far off its highest level in a decade. Source: XTB Macrobond

Turning our attention to the markets, there has been a little bit of weakness in the CAD following the release with traders seemingly focusing on the drop in the headline reading. Given the better components of the report it seems unlikely that the data will have a lasting negative effect on CAD however. 

USDCAD has seen 2 big red candles in the past 2 days and in doing so the market may have begun a downtrend. The 8 and 21 EMAs have done a good job of trend identification so far this year with the bullish cross (8 above 21) back in February preceding a strong run higher,  and more recently the latest push to the upside came after the bullish cross last month. There has been one bearish cross (at the beginning of April) and this led to a decline of around 400 pips. The 8 and 21 EMA are in a positive orientation but they are converging and could be seen to be close to a bearish cross. 

 USDCAD has declined recently and could be on the verge of printing a bearish cross of the 8 and 21 EMAs. Source: xStation