NFP-day but Canada focuses on trade data

It might be NFP day, however along with Jobs report, the release of trade balance from Canada is likely to concern the markets as well and more precisely Loonie against Greenback.

The trade balance is expected to show a narrowing in the deficit to -C$1.0 bln in August from -C$1.1 bln in July, while we will see also the release of the September Ivey PMI. Canada’s September Ivey PMI s.a. has been forecast to 54.3 from 60.6 in August, reflecting a slowdown despite the fact that the reading is above neutral.

In the currency market, USDCAD rallied sharply this week as the Canadian Dollar became afflicted by the 6%-odd tumble in Oil prices this week, which compounded the steep losses that were seen in the prior week. This has offset a narrowing in the Greenback’s yield advantage over the Loonie. The pair logged a 1-month high yesterday at 1.3348. The high seen on September 3, at 1.3382, which is a 15-week peak, provides an upside focal point.

Any unexpected weakness in the US jobs report today, which is the clear risk, would likely catalyse a correction in USDCAD at the initial blow, though it would also send Oil prices lower, especially with the weakening demand outlook dominating in crude market narratives presently, which would in turn curtail demand for the Canadian Dollar.

Therefore a downside point for USDCAD, could be the 1.3200-1.3265 range, in which it is consolidating the past 3-weeks, in case the asset seen moving below 1.3300. In the long-term outlook though , USDCAD remains in an upside channel the past 2 years. Currently it is close to the lower trendline of the channel, something that suggests a rebound in the medium term.

The next economic event for Canada is an October 18 panel appearance by Deputy Governor Lane. The BoC announcement is on October 30, when the Monetary Policy Report is also released. We expect no change in the current 1.75% rate setting alongside a wait-and-see approach to policy.

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Andria Pichidi

Market Analyst

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