Summary:

• Canadian employment change -88k vs +10.3k exp
• Solid rise in full time roles however: +49k
• Canadian dollar drops sharply before recovering

The Canadian jobs data has just been released, with the announcement causing some wild swings in the Canadian dollar which first dropped sharply before recovering the entire fall and actually moving higher on the day. The initial reaction saw the market rush to sell CAD as the headline employment number fell sharply to -88k from 78.6k previously. The print was the first in negative territory since August 2016 and the largest drop since February 2009 and when you also consider that consensus forecasts were for a +10K reading it is not surprising that there was a strong wave of selling. 

 Canadian employment dropped sharply last month to print -88k. Source: Bloomberg

As further details of the report were digested by the markets this selling was stopped in its tracks and the entire move higher in USDCAD of 80 pips was first erased, before the pair moved lower to fall back below the 1.26 handle.

 USDCAD jumped higher by 80 pips immediately after the release but the gains were short-lived as traders took the opportunity to short the market on the better sub-components of the report. Source: xStation 

One of the main reasons why the move may have reversed is the composition of the jobs data. Whilst the overall number saw a large drop this was entirely down to a fall in part time roles (fell by 137k – the most on record) and full time jobs actually increased by a fairly strong 49k.

 Despite a large drop in the headline reading the number of permanent jobs was still pretty strong at +49k. Source: XTB Macrobond

Another positive for CAD was the rise in wage growth of 3.3% Y/Y which was the best figure since 2015. As you can see from the chart below this metric has risen impressively of late and could be seen to indicate higher inflation levels going forward. 

 Another positive for CAD in the report was a notable increase in wages which came in at their best levels since 2015. Source: XTB Macrobond

Going forward USDCAD is currently at an interesting level on the D1 chart with the pair moving above the Ichimoku cloud immediately after the release before falling back inside. The daily candle is not looking too clever at present and tonight’s close could be key. Should the price end around these levels or lower then a pullback could occur going forward with the strong recent gains seemingly being stopped in their tracks. 

 USDCAD has run into some resistance in the D1 Ichimoku cloud and if it ends the day lower then a pullback may lie ahead. Source: xStation