USD/CAD trades with modest losses below 1.3800 ahead of US/Canadian jobs report

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The USD/CAD pair extends the previous day's late pullback from the vicinity of mid-1.3800s, or an over one-week high, and attracts some follow through sellers on Friday.

USD/CAD drifts lower on Friday as Fed rate cut bets continue to undermine the USD.
Trade uncertainties and subdued Oil prices might keep a lid on gains for the Loonie.
Traders now look forward to the crucial employment details from the US and Canada.

The USD/CAD pair extends the previous day's late pullback from the vicinity of mid-1.3800s, or an over one-week high, and attracts some follow through sellers on Friday. Spot prices, for now, seem to have snapped a four-day winning streak and currently trade just below the 1.3800 mark as traders keenly await the crucial monthly employment details.

The popularly known US Nonfarm Payrolls (NFP) report is due for release later during the North American session and will play an important role in influencing the near-term US Dollar (USD) price dynamics. This, along with Canadian monthly jobs data, should provide some meaningful impetus to the USD/CAD pair and produce short-term trading opportunities heading into the weekend.

In the meantime, the growing acceptance that the US central bank will lower borrowing costs in September and deliver at least two 25-basis-point rate cuts by the year-end keeps the USD bulls on the defensive. This, in turn, is seen as a key factor exerting some downward pressure on the USD/CAD pair. However, trade-related uncertainties might cap the upside for the Canadian Dollar (CAD).

In fact, US President Donald Trump has asked the Supreme Court for an immediate hearing in hopes of overturning an appeals court ruling that deemed most of his tariffs illegal. Furthermore, Trump said that his administration would impose tariffs on semiconductor imports from firms not moving production to the US, as it begins renegotiating the US-Mexico-Canada free trade deal.

Apart from this, subdued Crude Oil prices might hold back traders from placing aggressive bullish bets around the commodity-linked Loonie and contribute to limiting losses for the USD/CAD pair. Nevertheless, spot prices seem poised to register modest weekly gains and remain at the mercy of USD price dynamics.

Economic Indicator

Net Change in Employment

The Net Change in Employment released by Statistics Canada is a measure of the change in the number of people in employment in Canada. Generally speaking, a rise in this indicator has positive implications for consumer spending and indicates economic growth. Therefore, a high reading is seen as bullish for the Canadian Dollar (CAD), while a low reading is seen as bearish.

Why it matters to traders?

Canada’s labor market statistics tend to have a significant impact on the Canadian dollar, with the Employment Change figure carrying most of the weight. There is a significant correlation between the amount of people working and consumption, which impacts inflation and the Bank of Canada’s rate decisions, in turn moving the C$. Actual figures beating consensus tend to be CAD bullish, with currency markets usually reacting steadily and consistently in response to the publication.

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