Top 5 Events: March Canadian Jobs Report & USDCAD Price Outlook

The first two months of the year have produced strong labor market reports for the Canadian economy, and as a result, markets are anticipating a quieter March. The January employment change was 66.8K jobs, while the topline February reading came in at 55.9K.Even though the Bloomberg consensus calls for the March report to only show 10K jobs added,the unemployment rate is due to stay on hold at 5.8%. With energy markets continuing their rebound since the start of the year – nearly 11% of the Canadian economy is tied to oil – it‘s likely that jobs growth remained positive in Canada through the end of Q1’19.

The ongoing improvement in Canadian economic data has given traders pause over dragging forward rate expectations any further. Two weeks ago, the odds of a 25-bps rate cut were priced-in at 28%; currently, they reside at 20.2%.

Pairs to Watch: CADJPY, EURCAD, USDCAD

USDCAD Price Chart: Daily Timeframe (December 2018 to April 2019)

The better than expected January Canadian GDP report has helped keep USDCAD in check, despite broad advances by the DXY Index overall. In turn, the path of least resistance pointing to the topside proved false. As such, if there is one currency on the ready to take advantage of US Dollar weakness, it may be the Canadian Dollar – particularly as oil prices stay elevated.

A double top pattern may be forming with respect to the two March swing highs, and there is evidence that momentum is shifting to the downside. Not only have both daily MACD and Slow Stochastics turned lower, USDCAD price is now below its daily 8-, 13-, and 21-EMA envelope. A move down towards the March low near 1.3251 appears increasingly likely.