The Loonie is getting spanked.  Traders were expecting a weak employment report after July’s stellar headline print but not to the extent of this morning’s domestic data. Canada employment dropped by 51,600 in August led by a loss of 92,000 part-time jobs.  Statistics Canada noted that on a year over year basis, Canadian employment grew 172,000 or 0.9%.  The August report merely erases the July gains and will soon be forgotten.  USDCAD spiked from a pre-data level of 1.3115 to 1.3180.

The ongoing US/Canada trade talks.are the main focus for domestic markets and the Bank of Canada.  USDCAD dropped yesterday, falling from a peak of 1.3224 to 1.3115 overnight after a speech by Bank of Canada Deputy Governor Carolyn Wilkins.

She told an audience in Saskatchewan that the Bank discussed dropping the sentence “Governing Council also discussed whether the gradual approach to raising rates that we have been taking over the past year remains appropriate” from the statement.

She said it was  because the “economy has been operating at potential for the past year, and it is in this part of the cycle that interest rates typically rise to preempt a build-up in inflation pressures.”

One of the reasons that they kept the sentence is that they believe some of the inflation pressures were temporary.  What she left unsaid was the concern that the US/Canada trade talks could end without a deal.  The BoC models have incorporated the latest tariffs which will lead to a 0.75% drop in GDP by 2020.  They did not include the fall-out from new tariffs in the event of a non-deal.

USDCAD is also supported by the better than forecast US nonfarm payrolls data.  The US added 201,000 jobs in August, and average hourly earnings rose to 2.9% from 2.7%.  The unemployment rate ticked higher to 3.9%.

The US dollar rallied against the G-10 major currencies.  EURUSD dropped from an overnight peak of 1.1648 to 1.1575 as of 6:00 am PDT.  Weaker than expected Eurozone Q2 GDP data (Actual 2.1% vs 2.2% forecast didn’t help[ sentiment.   GBPUSD is a little worse for wear, but price movements are dictated more by Brexit headlines than US economics.

Traders are already looking ahead to next week’s ECB and Bank of England meetings.

USDCAD Technical Outlook

The intraday USDCAD technicals are bullish above 1.3110 and looking for a break above 1.3230 to extend gains to 1.3280.  A break below 1.3110 targets 1.3060 and then 1.3005.  The uptrend line from February is valid above 1.3005,  For today, USDCAD support is at 1.3130 and 1.3080.  resistance is at 1.3190 and 1.3230.

Today’s Range 1.3130-1.3230