Strong Canadian Jobs Numbers Drives Loonie to Support

The Canadian dollar gained traction on Friday, but the move was not strong enough to disrupt the uptrend in the USD/CAD which continues to portray U.S. dollar strength. Friday’s stronger than expected Canadian jobs number bolstered the Loonie, but data during the balance of the coming week will give deeper insight into the strength of Canada’s economy.

Canada payrolls climbed 43.1k in October, compare to expectations of a 4K decline following the 74.1k surge in September. Full time employment rose 26.5k after a 69.3k increase in September. Private sector employment rose 70.6k in September. The unemployment rate fell to 6.5%, compared to median expectations of 6.9% from 6.5% in September, leaving the lowest rate since November of 2008. The participation rate was 66.0%, matching the rate seen in August and September.

Manufacturing and housing data will highlight in the holiday shortened week with the bond market closed Tuesday for Remembrance Day. Bank of Canada Deputy Governor Schembri will deliver a presentation scheduled for Wednesday promoting Canada’s Economic and Financial Well-Being.

Manufacturing shipments scheduled for Friday are expected to climb 1.0% in September. It follows a 3.3% plunge in August, but considerable strength in the three months through July. Housing starts are expected to rise 3.9% to a 205.0k unit rate in October, building on the more modest 0.5% gain in September. The new home price index is projected to rise 0.2% in September after +0.3% in August.

The USD/CAD tumbled Friday following the stronger than expected Canadian jobs report. Support seems to have held near the 10-day moving average at 1.3020. Target support is seen near an upward sloping trend line at 1.1190. Resistance is seen near the recent highs at 1.1470. Momentum is turned negative with the MACD (moving average convergence divergence) index generating a sell signal. This occurs when the spread (the 12-day moving average minus the 26-day moving average) crosses below the 9-day moving average of the spread.

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