CAD

Tradervox (Dublin) - The Canadian economy posted jobs data today. The Canadian economy added an additional of 58.2k jobs (expected 10k) versus the previous 82.3k. This better than expected jobs data, however failed to bring down the unemployment rate. In fact the unemployment rate rose to 7.3% from previous 7.2%.
On the one hour chart the jobs data resulted in 2 big bearish candles bringing the USD/CAD pair to 0.99565. The pair found support at this level preventing it from further falls.
The US economy posted the producer price index and University of Michigan consumer confidence. The producer price index fell to a seasonally adjusted value of -0.2%. The fall in the producer price index can be attributed to the fall in the crude prices bringing down the energy costs. This fall in the producer prices will likely reflect in the Wholesale price index and filter down into the Consumer Price index, thereby bringing down the inflation. The fall in the inflation will ease the pressure on the Federal Reserve and the Federal Reserve can move ahead with its Quantitative Easing policy should the economy be affected from the slowing growth due to recession fears in the Euro zone. The Consumer confidence in the US rose from the previous value of 76.4 to 77.8 beating analyst’s expectations.
The USD/CAD has slightly recovered from the strong selling seen after the Canadian employment data. The recovery in the USD/CAD is not very strong and is a market reaction to the better than expected consumer confidence and producer price index data.
The USD/CAD is currently trading around the 0.998 level. The trend is in favor of the bears with bearish volatility building up. However the bearish trend is not very strong to cause a major fall in the pair. This is due to a renewed buying interest in the market due to better than expected US fundamentals. Additionally the crude markets are also not in favor of the Canadian dollar and this is damping the outlook of the bears in the USD/CAD.
The USD/CAD is likely to close the week around the 0.99 levels with slight bullishness dominating the trade.


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The CAD/JPY has already reclaimed about 50% of its decline from the middle of March to the middle of April and the CAD has strengthened on the back of a more hawkish central bank and the market pricing in a rate hike later this year by the Bank of Canada.
As a result the Canadian dollar has a stronger fundamental bias and if we have a fundamental catalyst where the BOJ does announced further easing – especially the higher amount of ¥10 trillion – the pair here is also likely to push higher towards the 84 level and then the highs from March around 84.90.
We should remember that these moves could be quite swift – similar to what we saw in the middle of February when the Bank of Japan first announced its inflation target and increase its bond purchase program – and we would also want to be cognizant of the sentiment factors which currently favors a weaker Japanese yen (looking at the action in S&P500 in Thursday’s NY session).

What if BOJ Doesn’t Ease?

If we do not see further easing from the Bank of Japan – which is a possibility – then we don’t necessarily have a reason to target these levels for either pair and we would have to trade the Japanese yen based on what is happening in equity and commodity markets and general risk appetite.
In fact the Japanese yen will likely strengthen as the BOJ would lose credibility from market participants that it is determinant to meet its inflation target (of 1%). We would however target some other currencies to long the JPY against – perhaps theEUR or AUD as they have a weaker fundamental bias currently. But, even the GBP and CAD are likely to weaken vs the JPY in such a scenario.