Trade the News: CAD May Rally After Canadian Employment Report
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Trade the News: CAD May Rally After Canadian Employment Report

DailyFX.com -

CAD TALKING POINTS:

- Canada publishes labor market data today and, with CAD sentiment highly bearish, the figures could prompt a rally.

- However, as the report is published at the same as US payrolls data, traders wanting to react to the figures should concentrate on EURCAD rather than USDCAD.

TRADING THE NEWS: CANADIAN EMPLOYMENT

Trade the News: CAD May Rally After Canadian Employment Report

Canada will publish its regular monthly jobs report today, with market forecasts centring on a 21,000 increase in employment and an unchanged 5.9% unemployment rate. However, it would be most unwise to trade the data via USDCAD as the US labor market report is published at the same time and USDCAD will react principally to that.

A much better way to trade the Canadian Dollar will be via EURCAD, as the Euro will likely be relatively stable after its gyrations Thursday, when the European Central Bank decided to remove its bias towards easier monetary policy.

EURCAD PRICE CHART, DAILY TIMEFRAME (JANUARY 1 - MARCH 8, 2018)

Trade the News: CAD May Rally After Canadian Employment Report

Chart by IG

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As the chart shows, the Euro has been rising against the Canadian Dollar, as has the US Dollar - most recently on concerns about a possible trade war and concerns about the NAFTA free-trade agreement between the US, Canada and Mexico.

This week, Canada left its interest rates unchanged and recent economic data have been weak. Nonetheless an interest rate increase to 1.5% from 1.25% is still possible in April, as long as NAFTA does not fall apart by then or look as though it is about to. If expectations of an increase grow before then, CAD should benefit.

EURCAD levels to watch out for

The Canadian Dollar is the world's sixth most traded currency and while most trading is in USDCAD, both EURCAD and CADJPY are fairly liquid too. Moreover, the downturn in EURCAD over the last couple of sessions suggest the trend may be changing and an initial dip back to the 20-day moving average at 1.5708 is entirely plausible if the net rise in employment exceeds expectations and makes an April rate hike more likely.

On the other side of the coin, a disappointing figure would likely send EURCAD back to the 1.6122 high touched Wednesday.

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- Successful t raders cut l osses, and let p rofits r un,

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--- Written by Martin Essex, Analyst and Editor

To contact Martin, email him at martin.essex@ig.com

Follow Martin on Twitter @MartinSEssex

original source

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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