USD/CAD drops after the weak US and Canada jobs data

By: Crispus Nyaga
Crispus Nyaga
Crispus is an active trader, where he is followed and copied at Capital.com. He lives in Nairobi with his… read more.
on Jan 8, 2021
  • The USD/CAD is hovering near its two-and-a-half low after the US NFP data.
  • The US lost more than 140,000 jobs in December while the unemployment rate remained intact
  • In Canada, the economy lost more than 62.6k jobs in December.

The USD/CAD pair is hovering near its lowest level since April 2018 after the mixed employment numbers from the United States and Canada. It is trading at 1.2680 and is on track for a second consecutive week of declines.

USD/CAD price action after US and Canada jobs data

US and Canada employment numbers

The biggest catalyst for the USD/CAD performance is the US nonfarm payroll numbers released by the Bureau of Labour Statistics (BLS). 

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The numbers showed that the American economy shed more than 140,000 jobs in December as the country continued to deal with the coronavirus pandemic. The median estimate by economists polled by Reuters was 71,000. The economy had created more than 334,000 jobs in November.

The unemployment rate remained intact at  6.7% while theU6 unemployment rate declined from 12.0% to 11.7%. Average weekly hours fell to 34.8 while wages increased by an annualised rate of 5.1%.

On Wednesday, data by ADP revealed that private payrolls fell by more than 123,000 in December. And yesterday, numbers by the BLS showed that more than 787,000 people filed for initial jobless claims last week.

These numbers are a sign that the economy is struggling due to the lockdowns imposed by most states. Also, they provide a hint that the incoming administration will have an incentive to provide more stimulus to the economy.

The USD/CAD also reacted to the December employment numbers from Canada. According to Statistics Canada, the economy lost more than 62.6k jobs in December after making 62,000 in the previous month. The unemployment rate also rose to 8.6% from 8.5% while the participation rate fell from 65.1% to 64.9%.

USD/CAD technical outlook

USD/CAD
USD/CAD technical chart

The USD/CAD pair is trading at 1.2680, which is an important support level. As you can see, the pair has had some challenges moving above and below this price. It is also below the 25-day and 50-day exponential moving averages.

Oscillators are also sending mixed signals. For example, the two lines of the moving average divergence convergence (MACD) are below the neutral level while the histogram is above. Also, the two lines of the Stochastic oscillator are between the extreme levels.

Therefore, the outlook for the pair is neutral. Any move below this year’s low of 1.2626 will mean that bears have prevailed. Similarly, moves above 1.2750 will be a victory for bulls. You can use a free demo account to take advantage of this price action.

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