USD/CAD. “Canadian Nonfarms” exerted additional pressure on the Australian dollar
June 9, 2023 4:22 pm
Today, the USD/CAD pair hit a four-week low, reaching 1.3315. Bears approached the lower line of the Bollinger Bands indicator on the daily chart but had to retreat: the notorious “Friday factor” and uncertainty associated with the June Federal Reserve meeting did their job. Nevertheless, bearish sentiment continues to dominate the pair. Today’s release added to the negative fundamental picture of the Australian dollar.
June meeting
Key labor market data for the US and Canada usually comes out on the same day or even simultaneously. Since US nonfarm payrolls set the tone for trading in all dollar pairs, Canadian figures take a backseat – they are of interest to a narrower circle of traders. The Australian dollar follows the greenback in the USD/CAD pair context, so “Canadian Nonfarms” is overshadowed by the more significant American release.
However, this month, there is a one-week “desynchronization”: the main US labor market report was published last Friday, while Canada’s report was released today. If the US release supported the greenback, the Canadian figures were unfavorable for the Canadian currency. In this regard, the bears of USD/CAD were lucky, so to speak, twice: the market had already played out the American data a week ago, and today the Australian dollar reacted to its figures.
Before discussing “Canadian Nonfarms,” a few words should be said about the significance of this release in the context of the June Bank of Canada meeting, the results of which we learned just the day before yesterday. Contrary to experts’ forecasts, the regulator raised the interest rate by 25 basis points. However, despite such a hawkish outcome, the Canadian dollar did not benefit from the situation: USD/CAD sellers quickly seized the initiative, dragging the price towards the 1.33 level.
These price dynamics were partly due to the overall strengthening of the US currency. But only partly. In making the decision to raise rates, the Bank of Canada indicated that this step could be the last in the current cycle of monetary tightening. This is evident from the fact that the central bank removed from the accompanying statement the April formulation that it is ready for further rate hikes “if necessary.” This is a dovish signal, indicating that the June decision is the final chord of the current tightening cycle for the Bank of Canada.
Today’s release only reinforced the confidence that the Bank of Canada will likely adopt a wait-and-see position soon.
“Canadian Nonfarms.”
The published labor market data in Canada could be better. Almost all report components fell short of expectations and did not reach the forecasted values. For example, most experts predicted growth in employment of nearly 25,000, while the figures demonstrated negative dynamics: in the last month of spring, the number of jobs decreased by 17,000. The structure of this component indicates a significant decline in full-time employment (-32.7 thousand) in May, while the number of part-time employees increased by 15.5 thousand. It is known that permanent positions offer higher salaries and social security, positively influencing Canadian consumer activity and, ultimately, inflationary growth in the country. Therefore, the May result is disappointing. By the way, the annual wage inflation measured by average hourly earnings reached 5.1%. There is a downward trend here (the indicator was at 5.2% in April).
The “headline” indicator of the release, the unemployment rate, slightly increased. However, the increase was minimal, rising to 5.2% from the previous value of 5.0%. The share of the economically active population decreased slightly to 65.5%. Again, the decline is minimal in this case, but a downward trend has been observed for the third consecutive month.
Conclusions
What do the published figures indicate? The May report reduces the likelihood of a rate hike at the next Bank of Canada meeting scheduled for July 12. Undoubtedly, inflation will play a decisive role, but the weak “Canadian Nonfarms” will also be considered in reaching a verdict. Therefore, today the bears of USD/CAD received another fundamental advantage.
From a technical perspective, on the D1 timeframe, the pair is positioned between the middle and lower lines of the Bollinger Bands indicator and below all the lines of the Ichimoku indicator, which has formed a strong bearish signal, the “Lines Parade.” This indicates a clear advantage for a downward movement. The nearest target for the downward movement is the lower line of the Bollinger Bands on the daily chart, around 1.3305. The main target is 1.3250, the lower line of the Bollinger Bands on the weekly chart.
The material has been provided by InstaForex Company – www.instaforex.com
Today, the USD/CAD pair hit a four-week low, reaching 1.3315. Bears approached the lower line of the Bollinger Bands indicator on the daily chart but had to retreat: the notorious “Friday factor” and uncertainty associated with the June Federal Reserve meeting did their job. Nevertheless, bearish sentiment continues to dominate the pair. Today’s release added to the negative fundamental picture of the Australian dollar.
June meeting
Key labor market data for the US and Canada usually comes out on the same day or even simultaneously. Since US nonfarm payrolls set the tone for trading in all dollar pairs, Canadian figures take a backseat – they are of interest to a narrower circle of traders. The Australian dollar follows the greenback in the USD/CAD pair context, so “Canadian Nonfarms” is overshadowed by the more significant American release.
However, this month, there is a one-week “desynchronization”: the main US labor market report was published last Friday, while Canada’s report was released today. If the US release supported the greenback, the Canadian figures were unfavorable for the Canadian currency. In this regard, the bears of USD/CAD were lucky, so to speak, twice: the market had already played out the American data a week ago, and today the Australian dollar reacted to its figures.
Before discussing “Canadian Nonfarms,” a few words should be said about the significance of this release in the context of the June Bank of Canada meeting, the results of which we learned just the day before yesterday. Contrary to experts’ forecasts, the regulator raised the interest rate by 25 basis points. However, despite such a hawkish outcome, the Canadian dollar did not benefit from the situation: USD/CAD sellers quickly seized the initiative, dragging the price towards the 1.33 level.
These price dynamics were partly due to the overall strengthening of the US currency. But only partly. In making the decision to raise rates, the Bank of Canada indicated that this step could be the last in the current cycle of monetary tightening. This is evident from the fact that the central bank removed from the accompanying statement the April formulation that it is ready for further rate hikes “if necessary.” This is a dovish signal, indicating that the June decision is the final chord of the current tightening cycle for the Bank of Canada.
Today’s release only reinforced the confidence that the Bank of Canada will likely adopt a wait-and-see position soon.
“Canadian Nonfarms.”
The published labor market data in Canada could be better. Almost all report components fell short of expectations and did not reach the forecasted values. For example, most experts predicted growth in employment of nearly 25,000, while the figures demonstrated negative dynamics: in the last month of spring, the number of jobs decreased by 17,000. The structure of this component indicates a significant decline in full-time employment (-32.7 thousand) in May, while the number of part-time employees increased by 15.5 thousand. It is known that permanent positions offer higher salaries and social security, positively influencing Canadian consumer activity and, ultimately, inflationary growth in the country. Therefore, the May result is disappointing. By the way, the annual wage inflation measured by average hourly earnings reached 5.1%. There is a downward trend here (the indicator was at 5.2% in April).
The “headline” indicator of the release, the unemployment rate, slightly increased. However, the increase was minimal, rising to 5.2% from the previous value of 5.0%. The share of the economically active population decreased slightly to 65.5%. Again, the decline is minimal in this case, but a downward trend has been observed for the third consecutive month.
Conclusions
What do the published figures indicate? The May report reduces the likelihood of a rate hike at the next Bank of Canada meeting scheduled for July 12. Undoubtedly, inflation will play a decisive role, but the weak “Canadian Nonfarms” will also be considered in reaching a verdict. Therefore, today the bears of USD/CAD received another fundamental advantage.
From a technical perspective, on the D1 timeframe, the pair is positioned between the middle and lower lines of the Bollinger Bands indicator and below all the lines of the Ichimoku indicator, which has formed a strong bearish signal, the “Lines Parade.” This indicates a clear advantage for a downward movement. The nearest target for the downward movement is the lower line of the Bollinger Bands on the daily chart, around 1.3305. The main target is 1.3250, the lower line of the Bollinger Bands on the weekly chart.
The material has been provided by InstaForex Company – www.instaforex.com
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