USD/CAD retreats as Canada unemployment rate falls

USD/CAD retreats as Canada unemployment rate falls
Written by:
Crispus Nyaga
November 6, 2020
  • The USD/CAD pair declined as investors reacted to the unemployment rate in Canada.
  • The unemployment rate declined to 8.9% while the economy added more than 87k jobs.
  • The pair also reacted to the ongoing vote tallying in the United States.

The USD/CAD pair declined today as traders reacted to the Canadian job numbers. It is trading at 1.3072, which is slightly below this week’s high of 1.3100.

Dollar index
USD/CAD declines as Canada’s unemployment improves

Canada jobs numbers

The Canadian economy is going through its worst downturn in modern history because of the Covid-19 pandemic. In the past few weeks, the number of daily infections has been rising, reaching to a high of 4,675 this week. In total, the country has confirmed more than 251k cases and more than 10k deaths.

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The country has also struggled because of the relatively low crude oil prices. As the world’s fifth biggest exporter, a decline in the price of oil usually leads to a lower demand for the loonie.

In general, all these factors have affected the country’s labour market. According to Statistics Canada, the economy added more than 83.6k jobs in October as it continued recovering. That was slightly below with what a panel of analysts polled by Reuters were expecting. It was nonetheless lower than the previous month’s reading of 378k.

At the same time, the unemployment rate declined to 8.9% from the previous month’s 9.0%. This number measures the number of people of working age who are out of work. The participation rate increased from 65.0 to 65.2%.

These numbers provide evidence that the Canadian economy is on a recovery path. However, with Covid cases rising, there is a possibility this growth will stall.

The US factor

The USD/CAD is also declining because of the situation in the United States which went to election this week. While the final tally has not been made public, the market believes that Joe Biden has an upper hand against the incumbent.

The US Bureau of Labour Statistics (BLS) also released the country’s nonfarm employment numbers today. The data showed that the economy added more than 638k jobs in October while the unemployment rate dropped to 6.9%. The average weekly hours remained unchanged at 34.8 while the average hourly earnings rose by 0.2%.

These numbers came a day after the Federal Reserve delivered its interest rate decision. It left interest rates and quantitative easing policy unchanged and pledged to continue support the economy.

USD/CAD technical outlook

USD/CAD
USD/CAD technical chart

On the daily chart, we see that the USD/CAD pair formed a double top pattern at 1.3420 between September and October. As you will find in our forex trading courses, this pattern is usually a bearish signal. The price is also below the 25-day and 50-day exponential moving averages. Therefore, it seems like bears are holding steady, which will likely see them target the next support at 1.3000.