November 5, 2021 8:09:09
We get a double helping of jobs data from North America this afternoon in the form of the monthly US non-farm payrolls data and the Canadian employment numbers. (Remember these are released at 12.30pm UK time.) Volatility should be expected in USD/CAD with data divergence, though one report may potentially cancel out the other.
In the US, consensus looks for a headline print of 450k. Unemployment is expected to fall one tenth to 4.7% in October. Labour shortages are supporting wage growth with analysts forecasting 0.4% in average hourly earnings. Full employment is expected towards the end of next year. The last two headline prints were revised up though they initially disappointed. So, like in September, some of the gains could come in revisions to the prior two months.
The Fed is now set on tapering which should end by the middle of next year. The next goal of reaching maximum employment remains key to start hiking rates. A strong headline number sees the dollar push up into new highs. Tapering is not policy tightening but it still reduces the global USD liquidity overhang and is dollar supportive. Any disappointment may see markets continue to reposition their bets on pre-emptive central bank action.
Canada’s pace of jobs gains nearly outshone the US in September. But this is not expected to be the case this time. Analysts expect around 65k new jobs from the prior bumper 157k, and unemployment to remain at 6.9%. The BoC recently opened the door to the first rate hike coming as soon as April. But markets are pricing in a very aggressive hiking cycle which may be prone to disappoint on soft data.
USD/CAD nears 200-day SMA
After making a new low at 1.2288, support around the 1.23 area has held losses. Prices have been consolidating around a Fib level (61.8%) of the June to August move. The failure of the loonie to push lower from a bear flag formation has disappointed CAD bulls.
Most recently, we have seen the major steadily make its way above that Fib mark at 1.2366. That level now acts as initial support. Prices are approaching the 200-day SMA at 1.2475. The halfway point of the June to August move is here too, at 1.2477. Next resistance is the mid-1.25 area.
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