USD/CAD: Canadian dollar spikes after surprise jobs report and higher oil prices

The USD/CAD fell sharply as the market reacted to the positive Canadian jobs data and higher crude oil prices. The pair is trading at 1.3413, its lowest level since March 6.

Canadian economy doing better

The Canadian economy is doing better than what analysts were expecting according to the latest jobs data from Statistics Canada.

The data showed that the Canadian economy created more than 290,000 jobs in May. This data was better – by far – than what analysts were expecting. Analysts polled by Reuters were expecting the economy to have lost more than 500,000 jobs in the month. In the same month, the number of Canadians who worked less than half their usual hours fell by 8.9%.

The unemployment rate rose to a record high of 13.7% from the previous 13.0. While this data was weak, it was better than the median estimate of 15.0%. The rate was about 5.6% in February, before the coronavirus-related shutdowns.

By industry, the biggest gains were in construction, where the total workforce rose by 19%. It was followed by services, wholesale and retail, and educational services, which grew by more than 9%.

Quebec, the biggest province in Canada, accounted for 80% of all job gains made in May. That is mostly because it was among the first places to relax the previous restrictions on movement. In Ontario, the number of employed people fell by 65,000 people while in British Columbia, it increased by 43,000 people.

Analysts were also caught off-guard by the better jobs report from the United States.

Crude oil boosts the Canadian dollar

The employment data came two days after the statistics department released disappointing international trade numbers.

The data showed that the country’s exports declined by 29.7% to $32.7 billion in April. Imports fell by 25%, leading to a trade deficit of more than $3.3 billion.

Meanwhile, the USD/CAD pair declined because of the rising crude oil prices. As of this writing, the price of Brent and WTI is up by more than 4%.

As I explained earlier, the boost in crude oil prices is mostly because of an upcoming OPEC+ meeting. Earlier today, Saudi Arabia and Russia managed to convince embattled Iraq to comply with the agreed supply cuts. The country will also compensate for the excess oil it pumped in May.

According to Bloomberg, there is an agreement among OPEC members and their Russian partner to continue with the cuts.

As the fourth-biggest oil producer, Canada benefits immensely when the price of crude oil jumps as it is doing today. Also, the price of oil rallied after the NFP data pointed to increasing demand for oil as more people go back to work.

USD/CAD technical outlook

On the daily chart, the USD/CAD is trading at the lowest it has been since March. The price is between the 61.8% and 78.2% Fibonacci retracement level and below the 50-day and 100-day exponential moving averages. Also, the RSI has slumped to its lowest level since January. With all this good news, there is a possibility that the pair will continue falling as bears target the support at 1.3310.