The weak April employment report from Canada met its match with an even more disappointing jobs reading from the US. This has kept USD/CAD relatively stable compared with other G10 peers. The bigger picture macro remains constructive for Canada, however, leaving economists at TD Securities still biased to sell rallies below 1.2365 after a period of consolidation.
April's disappointment can only be seen as a limited surprise
“USD/CAD remained relatively stable compared to other G10 currencies in the immediate aftermath of the April employment report. This comes as the US had its own set of weak jobs numbers to deal with. The offset is not perfect, however, and we think the US data may resonate for longer and more broadly. In any case, we do not expect today's print to see a durable change in the overall narrative on the economy.”
“The overnight low of 1.2143 remains intact in USD/CAD. Looking forward, we think we are likely to see more of a tug-of-war here over the very near-term as the dust settles. Those looking for a quick move lower toward the September 2017 lows at 1.2062 may be disappointed.”
“We also think the risks of a sharp squeeze higher have also eased somewhat. We see scope for some freshly-minted USD/CAD shorts established on the break below 1.2250 to begin rethinking their positions. However, we do not yet look for today's data to motivate a major shift in the overall trend. This leaves us biased to fade rallies for now, but will reassess on a push above key resistance at 1.2365.”