The headline number for Canadian June employment was so bad that priced surged 58 pips to 1.0704. Canadian employment came in at -9.4K, much lower than the +20k forecast. The unemployment rate also came in higher than expected at 7.1%. The one silver lining is that full-time jobs improved dramatically +33.5K. The reason for the terrible reading was from part-time work coming in at -43.0k.
The dismal job report will likely make the Bank of Canada’s job easy in staying put regarding any shifts on monetary policy.
Price action on the daily chart highlights that the bearish trend beginning on March 20th is tentatively finding key support from the 1.06 level. Traders should note that Canadian employment has been very volatile this year and this report is only the third weakest month of the year but that the overall 2-year trend has been improving.
If the current rally stalls around the 1.0750 area, a bearish butterfly pattern may be forming. You can see that since the March bearish butterfly pattern and May death cross, the bearish move has seen a couple of rebounds range around 150-200 pips. If the bearish trend resumes, we may see price capture the 1.0550 zone. If the current surge captures 1.08, major resistance will come from the 1.10 level.
The trade: Sell USDCAD at 1.0750 with a stop loss at 1.0805 and a take profit at 1.0605. The Risk/Reward Ratio is around 1:3
Edward J. Moya
WorldWideMarkets Online Trading