USD/CAD steady ahead of Canada, US job reports

• Canada’s job growth expected to ease to 22,500
• US nonfarm payrolls projected to decline to 170,000

The Canadian dollar is showing little movement on Friday. In the European session, USD/CAD is trading at 1.3740, up 0.03%.

US, Canadian job growth expected to ease

The week wraps up with US and Canadian employment reports, which could mean volatility from the Canadian dollar during the North American session.

The US releases nonfarm payrolls, which had a massive September and crushed expectations with a gain of 336,000. The markets are projecting a modest gain for October, with a market consensus of 170,000.

The ADP Employment Change report, which isn’t considered a reliable gauge for nonfarm payrolls but is still closely watched, posted a weak gain of 113,000 in October, well below the market consensus of 150,000 and following the September reading of 89,000. Will nonfarm payrolls follow suit or will we see another hot release?

The US dollar has declined against the majors since the Federal Reserve’s decision to maintain interest rates for a second straight time. Fed Chair Powell tried to sound hawkish and reiterated that rate hikes remain on the table, but the markets are in a dovish mood and believe that rates may have peaked.

If the nonfarm employment release follows ADP and misses expectations, it would likely mean the end of the current tightening cycle and I would expect the US dollar to decline after the release. Conversely, a strong non-farm payrolls report would support the Fed’s stance that rate hikes remain on the table and would likely translate into strong gains for the US dollar following the release.

The Fed will also be keeping an eye on wage growth, a driver of inflation. Wages rose 0.2% m/m in September and the market estimate for October stands at 0.3%. On an annualized basis, wage growth is expected to ease to 4.0% in October, down from 4.2% in September.

Canada’s employment is projected to ease to 22,500 in October, compared to 63,800 in September, which marked an eight-month high. The labour market has remained strong despite the Bank of Canada’s aggressive tightening, and a weak employment reading would boost the case for another pause from the BoC and could weigh on the Canadian dollar.

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USD/CAD Technical

• 1.3730 is a weak support level. Below, there is support at 1.3660
• There is resistance at 1.3805 and 1.3950

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