US jobs surge and domestic employment falls, dealing Canadian Dollar a double blow

• Contrasting employment data lift USD/CAD 0.78% on Friday, with the pair trading near 1.4120.
• October job growth in the United States reaches 165K, comfortably outstripping the 65K forecast.
• An unexpected loss of 4.7K jobs accompanies a rise in Canada's unemployment rate to 6.7%.

Stronger-than-forecast United States (US) employment data contrast with disappointing Canadian labour figures, lifting the US Dollar (USD) while putting pressure on the Canadian Dollar (CAD). USD/CAD has consequently extended its advance on Friday, rising 0.78% to around 1.4120 at the time of writing. Released simultaneously, the reports reveal a marked divergence between the two countries' labour markets and add to the pair's bullish momentum.

October Nonfarm Payrolls (NFP) rose by 165K against a market forecast of 65K, the US Bureau of Labor Statistics (BLS) said on Friday. Upward revisions also took September's reading from 29K to 60K and August's from 133K to 186K. Together, those revisions added 84K jobs to earlier estimates, offering further evidence of a resilient US labour market. Meanwhile, the US unemployment rate fell from 4.2% in September to 4.1% in October.

The unexpectedly strong jobs figures bolster expectations that the Federal Reserve (Fed) could keep monetary policy restrictive or consider additional interest rate increases should economic conditions remain resilient. Markets now assign a nearly 80% probability to a 25-basis-point interest rate rise in December, according to the CME FedWatch tool, compared with around 70% a day earlier. The repricing adds support to the US Dollar. At the time of publication, the US Dollar Index (DXY) is up 0.74% on Friday at around 102.35.

By contrast, Canadian employment figures point to a markedly softer labour market. Rather than the 13.6K increase anticipated by markets, the economy lost 4.7K jobs in October, Statistics Canada reported. That fall was less pronounced than September's sizeable 68.3K decline, but the unemployment rate rose from 6.5% to 6.7%, against expectations that it would remain unchanged.

Over the past three months, Canadian job losses have reached a combined 114.7K. The total underlines ongoing labour market weakness as uncertainty over US trade tariffs and their effect on recruitment persists.

For the Bank of Canada (BoC), these weak readings make the outlook more complicated following its benchmark interest rate increase on 28 October, the first in more than three years. Further deterioration in employment could prompt policymakers to proceed more cautiously with additional monetary tightening, especially if economic activity continues to face pressure.

The contrasting jobs reports therefore strengthen the divergence between expectations for Fed and BoC monetary policy, lending further support to USD/CAD. With US labour conditions proving stronger while Canadian employment weakens, the US Dollar could remain favoured against its Canadian counterpart.

USD/CAD meets resistance as technical indicators flag stretched momentum

On the four-hour chart, immediate resistance comes from the 200-period simple moving average (SMA) at 1.4120, just above USD/CAD's current level of 1.4119. Horizontal resistance at 1.4130 and 1.4150 forms a further substantial barrier overhead. This leaves the near-term outlook cautious, notwithstanding the sharp climb from support at the 100-period SMA (EMA) at 1.4035. Having jumped into overbought territory near 77, the Relative Strength Index (14) suggests that upward momentum may be overstretched, leaving the pair exposed to a corrective pullback while it stays below the 200-period SMA.

A move higher would first encounter the 200-period SMA at 1.4120, ahead of horizontal resistance at 1.4130 and 1.4150; beyond these lies a further barrier at 1.4200. If the pair retreats, the recent trading area around 1.4119 is the first zone to monitor. Firmer support lies at the horizontal level near 1.4070, followed by the 100-period SMA at 1.4035, where buying previously appeared. A return towards this cluster would suggest that the present advance is losing momentum.

(The technical analysis of this story was written with the help of an AI tool. Know more.)