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Canadian employment data could trigger new wave of volatility
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Hello everyone, today XM Forex will bring you "[XM Forex Official Website]: Canadian employment data may become the trigger for a new round of volatility." Hope this helps you! The original content is as follows:
On Friday (October 10) during the European trading session, Statistics Canada is about to release a labor force survey report. The market generally expects that the statistical data in this report will show xmspot.complex and diverse trends. If this economic report turns out to be softer, it will give the Bank of Canada more reason to continue to implement easy monetary policy. After suspending interest rate cuts for three consecutive times, the Bank of Canada lowered its benchmark interest rate by 25 basis points to 2.50% at its meeting on September 17.
Market participants generally expect Canada’s unemployment rate to rise slightly to 7.2% last month, up from 7.1% in August. Additionally, investors predict the economy will add about 5,000 new jobs in September, which would be enough to reverse the job losses of the past few months. Notably, average hourly wages, an indicator of wage inflation, increased by 3.6% year-on-year in August, up from 3.5% previously.
The market expects that the probability of the Bank of Canada cutting interest rates again at its meeting on October 29 is about 70%; at the same time, implicit interest rate expectations show that interest rates may be reduced by nearly 25 basis points by the end of the year. If the labor market data turns out to be weak, then the likelihood of further rate cuts later this month increases, which in turn could have a negative impact on the Canadian dollar's performance.
Analysis by TD Securities analysts: "Employment is expected to increase by 5,000 in September, a modest rebound after two months of large-scale layoffs. Hiring activity in the service industry should be the main driver of the rise in employment data, while employment in goods-producing industries is likely to be mixed."
There are few signs that this is the case.The Canadian job market is recovering. This morning's Canadian jobs report may provide some relief, but that may not be the case.
Previous economic activity in August and July resulted in the loss of 65,500 and 40,800 jobs respectively. If the labor market survey results are poor, the Bank of Canada is likely to cut its benchmark interest rate below what it considers to be a 'neutral range' (2.25% to 3.25%), which will further put pressure on the Canadian dollar.
Technical Analysis
USD/CAD resumed its bullish trend on Thursday after consolidating near 1.3900 for nearly two weeks. The change xmspot.comes against the backdrop of rising political uncertainty outside the United States, which has boosted safe-haven demand for the U.S. dollar.
The pair broke above the 200-day simple moving average (SMA), extending the uptrend that began at the June low of 1.3538 to a six-month high of 1.4032. Notably, the 4-hour chart shows that the pair appears to have broken out of a symmetrical triangle pattern to the upside. With the simple moving averages (SMA) still aligned in a positive direction, this breakout signals the possibility of further gains to follow.
However, a certain amount of caution is needed at the moment. The reason is that the price is near the 38.2% Fibonacci retracement level of the January-June decline range, which previously limited the gains in May and blocked the exchange rate around 1.4017. At the same time, the upper track of the upward channel is also in a similar range. The relative strength index (RSI) on the superimposed daily chart is hovering near the overbought level of 70, and the risk of a pullback has increased.
Therefore, whether it can stand firm at the 1.4050 mark and close above this level is the key to determining whether the rally can continue. If this level is exceeded, the exchange rate may further advance towards the 50% Fibonacci retracement level of 1.4165. Beyond this level, USD/CAD could challenge the long-term uptrend line drawn from the pandemic lows (around 1.4230) before testing the 61.8% Fibonacci retracement level at 1.4313.
If a bearish scenario occurs, in which the exchange rate falls back below the 200-day simple moving average of 1.3976, the market focus will turn to the 20-day and 50-day simple moving averages, with corresponding support levels of 1.3887 and 1.3830 respectively. If the selling pressure in this area intensifies and pushes the price below the channel's lower rail at 1.3800, support may appear in the double bottom pattern area near 1.3730.
Overall, the rise in USD/CAD has increased its bullish potential, but unless it can clearly break through the 1.4050 mark, there is still a risk of a correction.
The above content is all about "[XM Foreign Exchange Official Website]: Canadian employment data may become the trigger for a new round of volatility". It is carefully xmspot.compiled and edited by the editor of XM Foreign Exchange. I hope it will be helpful to your trading! Thanks for the support!
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