February 6. 2015
Loonie spinning like a top
USDCAD Overnight Range (including post payrolls) 1.2385-1.2495
The post payrolls pyrotechnics’ were spectacular and the Loonie was dazzled, jumping up and down like cold feet on hot sand. Canada posted a whopping 35.4 gain in jobs, greatly surpassing the mere 5K predicted and a huge jump from last month’s 11.3 K loss. USDCAD plunged to 1.2385 from 1.2430 and then roared straight up to 1.2595 because the US data was even more impressive. Nonfarm payrolls rose 257K, average hourly earnings were higher and November and December data were revised higher by another 147K.
Loonie’s head still spinning.
USDCAD traders don’t know whether they are coming or going this morning. The impressive rally from 1.2385 topped out at 1.2495 and it has retreated steadily. In fact USDCAD is sitting pretty much where it started before both employment reports.
WTI and Data at odds
The headline Canadian employment number is misleading as all the gains were part-time. In addition, recent history questions the accuracy of this Stats Canada data. On the other hand, WTI enjoyed an impressive rally yesterday and it is higher today ($51.61/bbl). Further gains in oil will likely put even patient long USDCAD positions to the test and result in a test of support at 1.2320.
Bullish CAD data at odds with US report
The mix of the better than expected Canadian employment report (headline number) and oil price gains have given new found life to the beleaguered Loonie. Unfortunately, getting bearish USDCAD on this mix at this level (1.2445) may be as dumb as passing on 2nd and 1 in a super Bowl game with Marshal Lynch on your team and on the field. The reason is simple. The US data was strong and with the large revisions, way better than expected. The added bonus was the rise in average hourly earnings. Taken together, it strengthens the case for a midyear US rate hike.
USDCAD technical Outlook
The intraday USD technicals are bearish USDCAD while trading below 1.2480 but needing a break below 1.2420 to extend losses to 1.2380. A break of 1.2380 would lead to a test of the short term uptrend line currently at 1.2320. A move above 1.2480 targets 1.2580